PICC Asset Management Co Ltd will buy a 15 percent stake in the main developer of China's third-generation (3G) mobile technology Datang Mobile Communications Equipment Co, a source said.

The company, a subsidiary of People's Insurance Company (Group) of China (PICC), will pay 1.5 billion yuan for the stake under a deal expected to be signed this week, according to the source.

Datang Mobile's parent company Datang Telecom Technology and Industry Group will also inject 1 billion yuan into the company, the source said.

Both Datang Mobile and PICC Asset Management declined to comment.

Datang Mobile has plowed its resources into the development of TD-SCDMA, the country's homegrown 3G telecom technology, to catch up with rival foreign 3G standards WCDMA and CDMA 2000.

Datang Mobile says it owns the key intellectual property rights on TD-SCDMA. It has designed TD-SCDMA chips and handsets, and is also providing wireless equipment to support the technology.

The government has yet to issue 3G licenses in China, but it plans to offer the services in time for the Beijing Olympics in August next year.

The homegrown standard is gaining momentum, and is expected to benefit not just Datang Mobile, but other domestic telecom equipment makers as well.

"Leading domestic providers Huawei Technologies, ZTE Corp and Datang are expected to become primary TD equipment providers," said Cui Jian, a telecom analyst at Bohai Securities.

"China Mobile may spend up to 30 to 40 billion yuan on its second TD equipment bid this year," Cui said.

"PICC is investing in Datang in anticipation of high returns from the 3G market when the government gives operators the go-ahead to build 3G networks based on TD-SCDMA," said Lin Zhenmin, a researcher with Shanghai-based KGI Securities Public Co.

Local operators are building TD-SCDMA trial networks in several cities. The networks are expected to be deployed in 10 cities by 2008, including Beijing, Shanghai and Shenzhen.

(Photo source:Google/Datang Mobile Communications Equipment Co)