Microsoft Corp. (MSFT) expects sales of mobile phones with its software in China to double in the next fiscal year beginning July from close to 2 million units estimated for the year ending June 30, a company executive said Wednesday.

Benjamin Tan, Director of Microsoft's Mobile Communications Business in China, told Dow Jones Newswires the company is also teaming up with local retailer D.Phone to open retail stores in China selling various phones using the Windows Mobile software.

Microsoft has opened nine such stores with D.Phone since October 2007 and plans to open a total of 50 by July of 2009.

In addition, Microsoft has opened 21 retail outlets selling mobile phones with electronics distributor Digital China Holdings Ltd. (0861.HK).

The retail stores represent a new sales model tailored to the China market, where most consumers buy their phones and operator subscriptions separately.

"Greater China is different from North America and Europe. Operators are not as involved in promoting phones to consumers," Tan said.

Demand for advanced smartphones that carry the Windows Mobile operating system will be boosted in China by the introduction of third-generation wireless services, which allow a higher-speed mobile connection, Tan said.

The Internet habits of Chinese consumers show they are particularly well- suited to take advantage of the faster connection speeds that a 3G phone would provide.

For instance, 80% of Chinese consumers use the Internet for streaming media, the highest percentage in the world, while less than 50% use the Internet for email, Tan said.

"The Chinese do not have the same legacy that almost holds back other markets from broad adoption of the latest technology, and we believe that when fast connections are available on mobile phones this will carry over very naturally," Tan said.

Over the weekend, China announced a restructuring of its telecommunications industry that will merge six telecom companies into three. Once the restructuring is complete, the government will issue licenses for 3G services.

Analysts believe that could take place late this year or possibly next year.

Tan said earlier this year that he expects licenses to be issued in the second half, but now says a short delay won't affect sales expectations.

"A lot of companies have been waiting for 3G for a long time, so what's a couple more months?," he said.

China is the largest mobile phone market in the world, with 583.5 million users at the end of April, according to figures from the Ministry of Industry and Information.

Source:Dow Jones