As China is expected to roll out its third generation of wireless telecommunications (3G) mobile licenses next year, the Little Smart phone service will maintain high growth this year but its growth will slow down next year, according to a report.

　　China's Little Smart subscribership is expected to grow by more than 30 million to 65.5 million by the end of this year, and the total number will hit more than 100 million by 2007, said an industry report released by Analysys International.

　　It said the future of local loop, otherwise known as Little Smart or "Xiaolingtong" in Chinese, hinges on the issuing, maybe next year, of China's third generation (3G) of wireless telecommunications mobile license and the subsequent development of 3G networks.

　　Since Litte Smart infrastructure appears to interfere with the 3G radio spectrum, many analysts believe that the development of 3G networks will spell the end of Little Smart infrastructure development.

　　However, Beijing-based Analysys projects that there is a 70 percent chance that China Telecom and China Netcom Corp Ltd, China's two largest fixed line operators, will deploy a strategy of developing both the local loop and 3G services.

　　Analysys predicts that Little Smart will sustain its momentum for a considerably long time even after the approval of 3G standards. The report said the two carriers will continue developing the Little Smart infrastructure to lure low-end customers and develop 3G networks gradually to attract high-end customers.

　　The Ministry of Information Industry once said that it will neither encourage nor interfere with the Little Smart's expansion. In May it allowed fixed-line telephone operators to offer the Little Smart service in the central urban areas of Beijing and Shanghai, the last two major areas that had been banned from launching the local loop service.

　　China Telecom and China Netcom do not have licenses to get into the lucrative wireless sector, but have exploited a loophole provided by local loop technology. This allows wireless services based on fixed-line networks. As of the end of last year, up to 35.5 million residents in small towns and cities, including Shanghai's suburbs, across China had subscribed to the Little Smart service to make much cheaper local mobile calls than normal mobile services.

　　Also, the report said Little Smart's low-cost advantage will be challenged if GSM, the dominant mobile standard, carriers adopt a one-way charge policy. Therefore, it will have to find other means to compete.

　　Handset makers need to enhance product's functionalities and reduce their reliance on OEMs, the report said.