China Mobile TD-LTE on Target for Big Leap in Data

China Mobile 4G LTE TakesoffChina Mobile is bang on Target to operate the World’s Largest TD-LTE network with over 700,000 4G BTS serving Mobile Broadband across China. China Mobile [CM] got a shot in the arm as the regulator delayed FD-LTE licensing and put forth a requirement that all 4G smartphones need to support TD-LTE. The company has been able to develop a successful TD-LTE smartphone supply chain with 50 4G smartphone models priced below Rmb 800 [There are over 100 TD-LTE 4G smartphone models commercially launched with prices below Rmb2,000 ]; It will maintain a lead in 4G smartphone supply with mature TD-LTE value chain.

The MIIT approved China Unicom [CU] and China Telecom [CT] for TD-LTE/FD-LTE hybrid network trials in only 40 cities so far. Because of delayed FD-LTE licensing (and hence much smaller 4G smartphone sales volume of CU and CT than CM) and the requirement that all 4G smartphones commercially launched in China should support TD-LTE, handset vendors tend to first produce 5-mode 4G smartphone models for CM, and then modify such model to a 4-mode smartphone for CU and CT.

CM hopes to efficiently address its data network user experience issue, and grasp the 4G growth time window in the next one year. 4G network coverage is still a major user complaint for CM. The 4G coverage issue is more important for CM than rivals as CM has inferior 3G network. CM is gaining back some high-end users from rivals with 4G a selling point, as CM’s brand image and customer service still lead its rivals in most local markets. CM has good 4G network quality in top-tier cities, and has seen word-of-mouth effect for its fast-speed 4G services. The iPhone 6 launch will likely further help CM maintain and even grow high-end user market share.

CU will likely revise up its 4G capex budget due to CM’s competition pressure, and its 4G network construction is more cost effective than CT due to more seamless upgrade to FD-LTE from WCDMA. CT will likely have bigger challenges and much higher capex pressure in 4G network than CU, mainly due to a lack of BTS towers. CT only had 366k base stations at June 2013, much less than CM’s 1,810k and CU’s 914k, and needs to find more site locations than rivals for LTE network deployment.

Good Demand for 4G Mobile Data
Telcos’ promotional service packages are focused on 4G in the local markets, especially for CM which has cancelled almost all promotions for 2G/3G. According to local operators, they adopt largely uniform 4G promotion policies across each province and their selling cost cuts have yet to significantly drag 4G service promotions by scaling back marketing resources for 2G and 3G.

China Moving Away from handset Subsidy to Services Discount
Chinese telcos are aggressively cutting selling costs (especially handset subsidies) and replacing part of the selling costs cut with tariff discounts (ie. tariff credit subsidies). CM and CT had cancelled or suspended handset subsidies in most of these cities. All three telcos recently launched more tariff discount plans mainly for new 4G contract users, as a major substitute marketing policy to replace handset subsidies. CM overall is more aggressive in tariff discounts than CU and CT.

Will Indian Regulator & Operators end the stalemate on Spectrum / Bandwidth and put the country on the Fast Path of 4G LTE Mobile Communication?

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