Opinion | China Mobile returns to the present

China Mobile's shifting focus to the present with new handset and Internet initiatives is a positive sign as the company's new leaders try to put the company back on a growth track.

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Published: 12:02pm, 6 Dec 2012

After months of maintaining a relatively low profile, China Mobile's (0941.HK; NYSE: CHL) recently named President Li Yue is finally making a splash in the headlines with some interesting strategic announcements that look like one of his first breaks with former longtime Chairman Wang Jianzhou. The two biggest new moves will see China Mobile develop its own brand of mobile phones, and also establish an Internet company. I personally don't find either of those two moves extremely exciting, though both could certainly have implications for many of China's smartphone makers and Internet companies.

Perhaps more significantly, this series of new initiatives indicates that Li and Xi Guohua, who took over as China Mobile's chairman earlier this year, will finally start taking some interesting new near-term steps to revive growth at the nation's dominant mobile carrier. That would contrast strongly with the recently retired Wang, who fixated on the company's 4G product that is still under development and largely ignored promotion of its current 3G service.

Let's take a closer look at these newest initiatives discussed by Li at a developers conference in the southern city of Guangzhou. According to media reports, Li said that China Mobile will develop its own brand of mobile phones, though he was also quick to add that those new phones wouldn't compete with models from handset makers like Huawei, ZTE (0763.HK; Shenzhen: 000063) and Lenovo (0992.HK).

A relatively youthful Li also said that China Mobile would set up its own Internet company in Guangdong province. There's not much detail about the new Internet company, and China Mobile already operates its own Internet portal that is the default homepage for people who surf the web using its 2G and 3G mobile networks.

So, what do these two new initiatives mean for both China Mobile and other mobile phone and Internet companies? This move into own-brand mobile phones is something that most US carriers have been doing for years now and is mostly aimed at brand building. The strategy is important at developing customer loyalty – something that is increasingly lacking in China's mobile market as many China Mobile users abandon the company for better 3G products offered by its two main rivals, China Telecom (0728.HK; NYSE: CHA) and China Unicom (0762.HK; NYSE: CHU).

This introduction of its own-brand handsets could perhaps create more customer loyalty, though I'm not completely convinced that it would have a major effect due to the bad reputation of China Mobile's 3G network, which is based on a homegrown technology. Perhaps the bigger impact could be felt by actual handset makers, most notably makers of lower-end products like ZTE and Lenovo that don't have strong brand loyalty among consumers.