China Mobile Expands Commercial 4G 中国移动增加4G试商用城市

Dominant wireless carrier China Mobile (HKEx: 941; NYSE: CHL) is turning up its campaign to pressure the telecoms regulator to issue 4G licenses soon, this time through aggressive comments from its chairman at the world’s biggest industry event taking place this week in Spain. Among all the latest talk, the item that most caught my attention was the disclosure that China Mobile is preparing to launch a “trial commercial” service this week in the major southern cities of Guangzhou and Shenzhen, expanding a program it began last month. (English article)

By keeping the word “trial” in the name of the service, China Mobile is technically playing by the government’s rules that say it can’t launch any official 4G service until the telecoms regulator, the Ministry of Industry and Information Technology (MIIT), issues 4G licenses. But from the looks of the latest reports, the new service in Guangzhou and Shenzhen will be identical to true commercial 4G service in every way except for the name.

China Mobile has been engaging in this kind of pressure tactic for more than a year now with the MIIT, whose conservatism often results in Chinese consumers being among the last in the world to get the latest services like 4G and gadgets like iPhones. I can’t blame China Mobile for using its pressure tactics, but would also add that it needs to be careful not to upset the regulator too much, which could result in turf war that could be disruptive to business.

All that said, let’s take a closer look at the latest news, which has media reporting that China Mobile will offer specially developed smartphones from Samsung (Seoul: 005930) for its new 4G trial commercial service in Guangzhou and Shenzhen, the 2 largest cities in affluent Guangdong province. The new phones will look and function largely the same as Samsung’s existing Galaxy S3 phones, but will be customized for a homegrown Chinese technology called TD-LTE that China Mobile is using in its network.

The report cites a microblog post from China Mobile’s Guangdong province unit, saying that China Mobile will spend 20 billion yuan, or about $3.2 billion, to build up its 4G network in Guangzhou alone. The Guangzhou and Shenzhen announcement follows similar news last month of another trial commercial roll-out for China Mobile’s 4G service in the cities of Hangzhou and Wenzhou, both in eastern Zhejiang province. (previous post)

This new expansion of its trial commercial program comes as China Mobile Chairman Xi Guohua made some more general but still quite aggressive remarks about his company’s 4G plans in his keynote speech at the Mobile World Congress taking place this week in Barcelona, Spain. Xi said his company’s 4G network would cover about 500 million people in 100 Chinese cities by the end of this year — quite a large number for a trial network. He also disclosed China Mobile’s plans to work closely with major mobile phone makers, including Samsung, HTC (Taipei: 2498) and ZTE (HKEx: 763; Shenzhen: 000063) to develop a wide array of smartphones that can run on TD-LTE networks. (English article)

So the big question is: Will these pressure tactics work and force the MIIT to issue 4G licenses, allowing China Mobile to finally remove the word “trial” from its service? My guess is that the regulator will want to show that it won’t be bullied by China Mobile or anyone else, meaning we’re unlikely to see any new licenses in the first half of the year. But the second half of the year is a much stronger possibility, meaning we could finally see China Mobile and perhaps one or both of its major rivals roll out true commercial 4G services by the end of this year.

Bottom line: China Mobile’s expansion of a trial commercial 4G service to Guangdong’s 2 largest cities is its latest attempt to pressure the regulator to issue 4G commercial licenses.

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This article was first published in the online edition of the South China Morning Post at www.scmp.com.

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