China Mobile

China enters new era with grant of 4G mobile network licenses

The move paves the way for an expected alliance between Apple and China Mobile, whose 3G services do not support iPhone

PUBLISHED : Thursday, 05 December, 2013, 6:00am
UPDATED : Thursday, 05 December, 2013, 6:00am

Beijing has awarded fourth-generation (4G) mobile licences to the three major mainland telecommunications network operators, paving the way for the much-anticipated alliance between China Mobile and Apple in the world's biggest smartphone market.

The Ministry of Industry and Information Technology yesterday granted network licences based on the mainland-developed 4G standard time-division long-term evolution (TD-LTE) to China Mobile, China Unicom and China Telecom, according to a notice on the ministry's website.

Network licences for the more widely deployed 4G standard, frequency-division duplex long-term evolution (FDD-LTE), was not awarded by the government.

The ministry said FDD-LTE licences will be issued "when conditions are more mature" on the mainland, without elaborating.

Beijing has been trying to engineer the economy's focus away from exports to consumption and the development of mobile broadband infrastructure is seen as a way to achieve that goal.

"The Chinese economy's transformation from an outward-oriented economy to one focused on domestic consumption can be realised with increased use of electronic payments," said Ricky Lai, analyst at Guotai Junan International.

"Improved network transmission speed and stability would enable more efficient e-commerce transactions and improved security."

The new 4G licence will likely benefit China Mobile, the world's largest wireless network operator, more than its peers. The company was first to conduct 4G TD-LTE trials in various mainland cities, including Beijing and Guangzhou. It is now investing heavily to expand the reach of its high-speed mobile network across the mainland.

Xiang Ligang, the chief product officer at telecommunications industry portal, said 4G is an opportunity for China Mobile to strengthen its leading position in the market.

China Mobile, which had 755.2 million subscribers on the mainland at the end of September, is hoping the 4G network expansion will grow the number of high-paying subscribers using mobile data services.

Compared with the 3G networks of its rival operators, China Mobile's 3G infrastructure does not support iPhone because it was built on the homegrown TD-SCDMA standard, which has been criticised for slower speed and is not supported by Apple's popular smartphone. That led Apple to first establish partnerships with Unicom and China Telecom because their 3G networks support the iPhone.

"China Mobile lost many high-end users due to poor 3G services," said Xiang.

Reports this week said China Mobile may have quietly closed a deal with Apple after years of negotiations.

Lai pointed out that a pact to distribute iPhones could hurt China Mobile in the short term because it would have to spend more on handset subsidies. For Apple, such a deal will allow it to access the huge user pool of China Mobile. Its market share in China has been challenged by domestic handset brands.

A note by RBC Capital Markets yesterday said a deal with China Mobile could add US$10 billion a year to Apple's revenue.