22 April 2019

Telcos have their own woes as 4G era draws near

With the dawning of the era of fourth-generation (4G) wireless telecommunications, China Mobile (00941.HK, CHL.US) has wasted no time in bolstering the number of its 4G base stations to over 200,000 nationwide. But its rivals China Unicom (00762.HK, CHU.US) and China Telecom (00728.HK, CHA.US) have largely remained silent about their visions and plans for the new regime.

That’s all because of the rumor that the Ministry of Industry and Information Technology (MIIT) has already decided to give the green light to just one 4G standard, the time division long-term evolution (TD-LTE) spearheaded by China Mobile. The technology has seen a rather sluggish growth in commercialization with just a handful of overseas carriers conducting trial use.

Back in 2008, the government approved more than one 3G format and subscribers embraced Unicom and Telecom for their faster and easier networks, allowing the pair to substantially consolidate their positions in the past years. Now, if the MIIT endorses only one format for the country’s 4G foray, Unicom and Telecom may lose their hard-earned user base to China Mobile.

Previously, the road to 4G for Unicom and Telecom was expected to be far less daunting as the pair adopted a more practical approach — the widely used frequency division long-term evolution (FD-LTE) technology that represents more than 90 percent of the world’s 4G market share. Moreover, FD-LTE allowed for a smooth upgrading from the pair’s existing 3G networks.

Telecom president Wang Xiaochu {王曉初} recently admitted that his company would have to rely on China Mobile’s TD-LTE network to provide 4G services, while Unicom chief Chang Xiaobing {常小兵} bluntly noted that FD-LTE should also be given a role for the sake of fair play, The Economic Observer reports.

That said, it would also be a mistake to conclude that China Mobile will have an easy ride. Reports have it that the MIIT will soon adjust inter-network settlement rules – China Mobile will have to pay six fen per minute to Unicom and Telecom for inter-network calls, while Unicom and Telecom just need to pay half of the amount for such calls. Analysts say China Mobile will suffer a hit of 13 billion yuan (US$2.14 billion) as a result.

A proposal to allow subscribers to switch to another carrier using the same cellphone number can deal another blow. Although China Mobile may woo more users with its upcoming 4G offerings, the lack of gadgets with full TD-LTE compatibility as well as Unicom and Telecom’s cheaper 3G packages are likely to lead to some uncertainties.

With the relentless lobbying by Unicom and Telecom, the possibility that the MIIT will approve the more popular FD-LTE standard shortly after the launch of TD-LTE services cannot be ruled out.

Even if China Mobile rides on the first-mover advantage, the experience of overseas peers can be disheartening — at least at the start. South Korea’s SKT reportedly suffered a 40 percent plunge in revenue after the launch of 4G services due to soaring marketing expenses and the impact from over-the-top applications. Some consulting firms say China Mobile may need at least three years to realize the full commercialization of its 4G business.

– Contact the writer at [email protected]



EJ Insight writer

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