China Mobile stabilises, set for growth
New subscriber data for China's three major telcos has just come out for January, so it seems like a good time to take a look at what's ahead this year as Beijing gets set to issue 4G licenses that will usher in a new era for the sector. Based on the data and other recent developments, it does indeed look like industry leader China Mobile (0941.HK; NYSE: CHL) could finally return to a growth track in the Year of the Snake after years of stagnation as it struggled under its own massive weight. That prediction comes at least partly from the latest industry data, that shows China Mobile's share in the important 3G market has finally stabilised after it lost steady share over the last two years to more aggressive rivals China Telecom (0728.HK; NYSE: CHA) and China Unicom (0762.HK; NYSE: CHU).
The latest data show that China Mobile had 38 per cent of the 3G market at the end of January, while Unicom had 32 per cent and China Telecom had 29 per cent. That's a hugely different picture from two years ago, when China Mobile had 45 per cent of the 3G market after it and the other two telcos launched their 3G service. But the latest figures are nearly identical to the market share data from the middle of last year, meaning the situation appears to have largely stabilised and China Mobile is unlikely to see its 3G market share fall much further.
That's an important point as we head into 2013, when China's telecoms regulator looks set to hand out 4G licenses perhaps as early as the first half of the year. China Mobile's poor performance in 3G has been largely due to lackluster promotion of its network, which has been problem plagued by its reliance on a homegrown technology called TD-SCDMA. But while China Mobile was a reluctant promoter of its 3G network, the company has finally realised that data services are critical to its future and looks set to market its 4G service much more aggressively.
The company has already set up a national 4G network that is still officially in the trial stages, but could instantly become a commercial service when the telecoms regulator awards 4G licenses. China Mobile has also been proactively working to make sure there will be sufficient smartphones to use on its 4G network, which also uses a homegrown technology. That could include the company's signing of a deal to finally offer an iPhone for its 4G network, making China Mobile the last of the country's three major telcos to sign such a deal with Apple (Nasdaq: AAPL).
China Mobile is also taking a number of other proactive steps, including entering revenue-sharing negotiations with some companies that offer popular mobile Internet-based services over its network. The highest profile of those saw China Mobile reportedly enter talks for a revenue sharing agreement for Tencent's (0700.HK) popular WeChat mobile instant messaging service. Lastly, there's the strong possibility that Beijing will launch a pilot program to allow virtual network operators (VNOs) into the market this year, giving China Mobile a chance to earn some more money by leasing capacity on its market-leading network to a strong VNO partner.
If everything goes according to schedule, look for China Mobile's 3G market share to remain stable at current levels, and then for the company to quickly gain some new momentum when 4G service begins. I wouldn't be surprised to see China Mobile instantly grab up to half the 4G market when new licenses are awarded, though that figure will probably drop somewhat to perhaps around 40 per cent as Unicom and China Telecom roll out their services.
Bottom line: China Mobile's 3G market share stabilised in the second half of 2013, and the company could quickly grab up to half of the 4G market when new licenses are issued later this year.
To read more commentaries from Doug Young, visit youngchinabiz.com