China got its first femtocell (mini home base station) product as the country’s second largest wireless carrier, China Unicom (CHU) launched a femtocell solution (called “3G Inn”) in the capital Beijing. The device has been supplied by the leading Chinese vendor Huawei Technologies. China Unicom plans to eventually expand the femtocell service to other Chinese markets.

Femtocell is a mini cell tower which connects to the service provider’s network using broadband and is aimed at improving indoor network coverage (as much as 5,000 square feet), providing low-cost unlimited in-home voice calling plan and reducing monthly communication expenditure.

Essentially, 2009 has been marked as the year of femtocell as leading telecom carriers across the globe are aggressively bidding to leverage this emerging market opportunity. Femtocell services used by 3G mobile subscribers are projected to generate revenues of approximately $9 billion by 2014.

Sprint Nextel (S) became the first carrier in the world to commercially offer femtocell with the launch of its award-winning Sprint AIRAVE in Aug 2008. Sprint was followed by Verizon (VZ) which unveiled its femtocell product (Network Extender) in early 2009.

Moreover, Vodafone (VOD) became the first carrier in Europe with the commercial launch of its femtocell product (Access Gateway) in the UK in Jul 2009. US telecom giant AT&T (T) and Japanese wireless operator NTT DoCoMo (DCM) launched their respective femtocell services (3G MicroCell and My Area) in Sep 2009 and Nov 2009, respectively. Spain’s Telefonica (TEF) is currently conducting trial runs through its subsidiary O2 in Europe.

3G Inn , which connects 3G mobile handsets to broadband Internet network, has been designed to boost indoor 3G coverage. The device is capable of delivering peak speeds of 7.2 megabits per second (Mbps) over HSPA (high speed packet access) 3G network, which is faster than Verizon and Sprint’s femtocell products. This fast network throughput will effectively support bandwidth-intensive applications such as video streaming, IPTV and video conferencing.

The new femtocell product is expected to garner attractive revenue streams through new service offerings while providing significant opportunity to reduce churn (customer switch) by improving service coverage.

Zacks Investment Research

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