BEIJING: China is starting a long-delayed introduction of a third-generation mobile phone service, setting off a politically charged scramble by Chinese and foreign equipment makers for up to US$41 billion (S$58.7 billion) in orders.

Chinese sales could be crucial for suppliers such as Motorola, Alcatel-Lucent and Nokia Siemens Networks as global demand slumps. State media say the largest carrier, China Mobile, expects to sign up 100 million 3G subscribers in three years - more than most nations' entire mobile markets.

'The China market is one of the most important markets for Alcatel-Lucent,' said a spokesman for the French-US company, adding that China will make up 'an important percentage' of its 3G sales.

On Wednesday, the Chinese government announced it had formally approved the issuing of 3G licences.

But how much business global suppliers get depends in part on whether regulators try to boost China's high-tech industry by ordering carriers to buy domestic products. Beijing has tried to use such restrictions to nurture other fields, prompting complaints by the United States and other trading partners.

Foreigners are likely to get less than half of China's 3G orders, said Mr Duncan Clark, chairman of a Beijing consulting firm, BDA China. 'It's basically an intensely political process,' he said.

The leading domestic suppliers are Huawei Technologies and ZTE - ambitious, government-supported upstarts that already sell low-cost gear in Africa and Asia and are improving their technology.

The US and European Union are closely watching the selection process and are pressing Beijing to abide by its commitment to the World Trade Organisation to treat foreign and domestic companies equally.

China has the world's biggest population of mobile phone users, and customers readily pay for the latest games and services. But it is one of the last major markets to adopt 3G, which supports video and other new features.

Beijing delayed issuing licences while it developed its own 3G standard, called TD-SCDMA, to compete with two global systems. The communist government wants China to create profitable technologies, and telecommunications is one area targeted for development.

The Industry Minister, Mr Li Yizhong, said last month that Beijing will give 'strong support' to TD-SCDMA. That suggested more orders might go to Chinese manufacturers that developed the standard, though the minister gave no details.

He said carriers are expected to spend 280 billion yuan (S$58.7 billion) on base stations, switching gear, transmission networks and other infrastructure.

Even though the carriers are state-owned, Chinese companies sometimes resist orders to take steps that hurt profits. It is unclear whether Chinese equipment is considered good enough to support complex 3G services that will form the core of their future business.

ASSOCIATED PRESS