In 2009, China Mobile released nine models of the Ophone that can run on the TD-SCDMA network and offers customized applications for high value-added services such as music downloads and mobile TV. The company also launched its own operating system—OMS (open mobile system). It was based on Google's Android and China Mobile tweaked the software to localize it to China.

But that is still far from enough, said Wang Jianzhou, Chairman of China Mobile. "We hope the number of TD-SCDMA handset models could reach 200 in the first half of 2010."

3G MANIA: A mobile user walks by an advertisement of 3G services from China Unicom called "WO" in Nanjing, Jiangsu Province (CFP)

The gap may not be difficult to fill. China Mobile reportedly plans to subsidize high-end handsets for customers with up to 50 percent off the retail price, provoking the burning enthusiasm of phone makers.

A number of international brands like Nokia, Samsung and Motorola are quickly jumping on the bandwagon, making a firm push into TD-SCDMA handsets.

With more handsets available and growing brand recognition, the TD-SCDMA network is bursting with vitality, mounting pressure on its rivals, said Li Zhiwu, a senior analyst with the BOCOM International Holdings Co. Ltd., a Hong Kong-based investment bank.

After acquiring the CDMA mobile technology from China Unicom, China Telecom, the country's largest fixed-line operator, became the newest player among the trio. But the latecomer was no less ambitious to chime in. In its latest effort to cash in on the 3G bonanza, China Telecom in May 2010 inked an agreement with Research in Motion to offer Blackberry services to corporate clients in 16 provinces across the country.

China Telecom earlier last year launched its 3G service, called "e-surfing," which enables users to go online with an Internet handset equipped with applications allowing access to e-mails, instant messaging and music downloading. In addition, it tried to exploit the advantage of being the sole provider of both fixed-line and mobile services, offering a series of bundling and convergency services.

Such aggressive strategies allowed China Telecom a head start in the race. By the end of 2009, its 3G subscribers had totaled 5 million, barely below 5.51 million of China Mobile. But when the bigger rival started picking up its promotional efforts, the China Telecom momentum faded.

Despite wide network coverage, China Telecom will face an uphill battle because the mid-to-high-end customers in big cities have already been won over by China Mobile and China Unicom, said Wang Liusheng, an analyst with the Beijing-based Analysys International Consulting Co. Ltd.

One countermeasure of China Telecom was to step up cheaper smartphones and service packages, which intensified price competition in the industry, said Wang.

Profit woes

As telecom giants continue to ride the 3G wave, one concern lingers for them—the investments in 3G networks and product promotions are taking a big bite out of their profits.

China Mobile raked in profits of 25.5 billion yuan ($3.7 billion) in the first quarter this year, representing a modest increase of 1.1 percent year on year, a record low on a quarterly basis.

The pains of its competitors were no less acute: China Unicom reported a profit of 1.1 billion yuan ($161.1 million) from January to March, a sharp drop of 68.3 percent; and the profit of China Telecom fell 9.1 percent to 4.3 billion yuan ($630 million).

There is no surprise that their road to profitability will be a bumpy ride. Overseas 3G networks have been in commercial use for around 10 years, but almost none bring profits to their carriers except in Japan due to heavy network costs. Even the Hutchison Whampoa of Hong Kong, one of the first operators in the world to start 3G businesses, is still spilling red ink after eight years of development.

The mounting financial pressure will force the carriers to trim their capital expenditures this year, and they are likely to focus more on attracting upper-bracket users who can generate more revenue, said Huang Wenge, an analyst at the Shenzhen-based Essence Securities Co. Ltd.

"But the start-up investments will eventually pay off," said Huang. "As Chinese consumers gain interest in value-added services, the 3G businesses will become a significant component, if not a pillar force, for the telecom industry."