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China telecoms market to surpass Japan by 2014

The growth of China's mobile industry will weather the economic decline, driven by the rollout of 3G networks and extended coverage into rural areas.

China's telecommunications market is on track to generate $187 billion by 2014, fueled by mobile uptake in its rural areas and by 3G technology, according to Pyramid Research.

The latest annual report from the analyst firm estimated that the country's telecoms market generated $110 billion last year, "making it the second largest telecommunications services market in the Asia-Pacific region after Japan."

Pyramid estimates that the Chinese market will surpass Japan by 2014, growing at a compound annual growth rate of 8.8 percent between this year and then.

Daniel Yu, Pyramid Research analyst said: "China, like many emerging markets, is becoming an increasingly mobile market, adding 71.2 million mobile subscriptions in 2008, roughly 12 percent of all additions worldwide and second only to India's 113.3 million net additions."

Rising penetration of mobile services will push revenue growth from 58 percent at year-end 2009 to 80 percent at year-end 2014, with mobile services expected to account for more than 76 percent of total services revenue in the country by then.

The growth of China's mobile industry will weather the economic decline, driven by the rollout of 3G networks and extended coverage into rural areas. Yu highlighted China Mobile dedicating 30 percent of its total capital expenditure to 2G network expansion, and 70 percent of that allocation to the rural market.

Another analyst firm, Gartner, remarked last year that China's growth in broadband penetration will lead the next wave of growth in the region. However, Gartner's report also noted that service providers in the emerging markets will focus on increasing connections and will not be able to raise the level of additional services to match that of mature markets.

Since the awarding of the country's 3G licenses in January, China's operators have been working to accelerate roll out of the faster networks. This is expected to spark a new wave of 3G investments in the market, although China's delay to award the licenses was said to have stalled investment, as carriers remained cautious.

Last year, China Mobile, the largest telco in China, reportedly faced obstacles in its efforts to win rights to , in part because its 3G network was not yet ready.

Victoria Ho of ZDNet Asia reported from Singapore.