Chinese vendors Huawei Technologies and ZTE have not only shaken up the global mobile infrastructure market, but are also taking share from domestic rivals.

Research firm Infonetics says that the two companies have been the main benefactors of China’s 3G roll out, pushing the global market share of both companies up in the global mobile infrastructure market.

“Between China Mobile, China Unicom, and China Telecom, a total of 59,000 3G base transceiver stations (BTS) were deployed in China alone in 1Q09, helping Huawei and ZTE gain significant share at the expense of most of the other major players in the RAN equipment market,” said Stéphane Téral, Infonetics Research’s principal analyst for Mobile and FMC Infrastructure. “Huawei is now the size of Alcatel-Lucent in this segment, and ZTE doubled its RAN revenue market share over just the last 4 quarters, solidifying its spot on the top 5 vendor leaderboard.”

However, it is not only global rivals who have suffered the onslaught of Huawei and ZTE.

According to a report by Beijing-based research firm, Interfax China, China Mobile will now replace TD-SCDMA equipment it originally sourced from state-owned firm Datang Mobile Communications Equipment with equipment from Huawei and ZTE. The report says that Huawei will replace Datang’s gear in Shanghai and ZTE will take over the Guangdong network.

The report, citing unnamed sources at the two operating subsidiaries, says as many as 60,000 Datang TD-SCDMA base stations will be replaced in the two operating regions.

The sources told Interfax that the key motivation in the replacement scheme is the lack of LTE migration support from Datang’s equipment. China Mobile have explicitly stated that it wants to fast track to LTE, and is moving forward with plans to promote the development of interoperability of TD-LTE – the natural migration path for TD-SCDMA, and FDD-LTE, the evolution to WCDMA and HSPA.

In its recent Form-20 filing with the US Securities and Exchange Commission, China Mobile highlighted its use of TD-SCDMA as a key risk, calling the technology ‘unproven in commercial use or widely adopted,’ and lacking a mature industry chain. “As a result, we have encountered and may continue to encounter challenges in the deployment of our 3G services, which could have a material adverse effect on our financial condition and results of operations as well as our revenues and profitability,” China Mobile said.

As part of the filing, China Mobile highlighted as one of its business strategy, the promotion of a synchronized development and convergence of TD-LTE and FDD-LTE.

The reason for the move seems to be confirmed by the sources, who revealed that Huawei and ZTE are supplying the new equipment free of charge, presumably in the hope of benefiting from future upgrade of the equipment.

Both Huawei and ZTE have developed and is commercially shipping mobile equipment using software defined radio technologies, enabling its equipment to be upgraded to future LTE platforms when needed.

Huawei has already secured its first LTE contract with TeliaSonera in Norway, while ZTE recently claimed its SDR technology is now powering Hong Kong operator, CSL’s HSPA+ network.

Meanwhile, Infonetics’ 1Q09 Mobile Infrastructure and Subscribers market share report found steep declines in the mobile infrastructure market with the exception of WCDMA and packet core equipment, which were fuelled by the 3G roll outs in China.

“WCDMA vendor revenue increased 8% between 4Q08 and 1Q09, and is up 61% year-over-year, mainly due to China's 3G rollouts and smartphone- and data card-driven upgrades in North America and Europe,” Infonetics said. “Despite the global economic turmoil, mobile packet core and mobile softswitching (soft MSC and wireless media gateway) deployments continue to be the brightest spots of the mobile infrastructure market, driven by an unstoppable migration to IP network.”