China Mobile: 4G Near, iPhone Far 中国移动:4G接近,iPhone走远

The aggressive 4G aspirations of leading wireless carrier China Mobile’s (HKEx: 941; NYSE: CHL) have just received a major boost from the telecoms regulator, which has said licenses for next-generation wireless networks known as LTE will be issued in about a year. At the same time, however, China Mobile is suffering the latest in a long series of disappointments for its current 3G service, with word that there are no immediate plans to launch an Apple (Nasdaq: AAPL) iPhone for the struggling network that uses a problematic homegrown technology called TD-SCDMA.

Let’s look at the 4G news first, as that’s the most exciting and significant from a longer term perspective. Previous signals from the Ministry of Industry and Information Technology (MIIT) had indicated that 4G licenses wouldn’t be issued until 2014 at the earliest, and possibly as late as 2015, as the regulator gave the nation’s 3 major telcos time to earn some returns on their billions of dollars in investment on their current 3G networks built in 2009 and 2010.

Despite those signals, China Mobile had moved aggressively forward with development of a 4G network based on another homegrown technology, called TD-LTE, by building extensive trial networks for the service in a half dozen major cities around the country. China Mobile was hoping to use 4G to regain some of the momentum it has lost over the last 2 years to rivals China Unicom (HKEx; 762; NYSE: CHU) and China Telecom (HKEx: 762; NYSE: CHA), whose 3G networks use globally accepted technologies that are much more reliable than China Mobile’s.

So this latest announcement from MIIT Minister Miao Wei that 4G licenses will come in about a year should come as a major boost to China Mobile, whose 4G network should be widespread and well-tested enough by that time to allow it to offer commercial service almost immediately afterwards.  (Chinese article)

The 4G licensing news may look good for China Mobile over the longer term, but it could actually hurt the company over the next year as the company is likely to continue neglecting its problem-plagued 3G network and continue to lose market share to China Telecom and China Unicom. When timing for the issue of 4G licenses was still uncertain, China Mobile was making recent moves that indicated it might finally be preparing to more aggressively market its 3G network, which has been plagued by technological problems and also a lack of handset models.

In a bid to address the handset problem, China Mobile was reportedly near a deal to offer a TD-SCDMA iPhone, following the recent roll-out of TD-SCDMA smartphone chips from Qualcomm (Nasdaq: QCOM), one of Apple’s main smartphone chip suppliers. (previous post) That development had led some, myself included, to speculate that perhaps we could see a TD-SCDMA version of the iPhone 5, which is set to debut later this month.

But Chinese media are reporting that a number of China Mobile executives around the country are saying they haven’t heard of any plans for a TD iPhone 5. Following this latest 4G announcement from the regulator, I wouldn’t be surprised if China Mobile now delays any plans for an iPhone until 4G licenses are issued. At that point, it could then introduce an iPhone that finally operates on its networks as part of a commercial launch of 4G service as soon as late next year.

Bottom line: China Mobile is likely to launch 4G service by the end of next year, and could include its first-ever iPhone as part of that launch.

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