Corporate China
PUBLISHED : Tuesday, 10 September, 2013, 10:03am
UPDATED : Tuesday, 10 September, 2013, 10:04am

4G, Apple deal near with new smartphone approvals

China's approval of its first batch of 4G phones indicates 4G licenses will be awarded soon, at which time China Mobile could announce an Apple tie-up.

BIO

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young’s China Business Blog (www.youngchinabiz.com), commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, “The Party Line: How the Media Dictates Public Opinion in Modern China.”
 

Local media are buzzing with word that China's telecoms regulator has just approved four smartphones for use on the nation's upcoming 4G networks, implying the long-awaited issue of 4G licenses could be imminent. But equally interesting is a separate report that says the number of newly approved phones is actually five, and that the fifth phone was a version of Apple's (Nasdaq: AAPL) new iPhone 5S that can operate on networks using a homegrown Chinese technology called TD. That report says Apple requested its iPhone approval be kept secret; but if true, it means we could soon see announcement of a long-awaited tie-up between the US tech giant and leading Chinese mobile carrier China Mobile (0941.HK; NYSE: CHL).

The bigger picture in all this is that China's Ministry of Industry and Information Technology (MIIT), after years of foot-dragging, finally looks set to award its first batch of 4G licenses. Most other countries awarded 4G licenses long ago and many already have functioning commercial networks, which allow for easy use of data-intensive functions like video. Previous reports indicated the MIIT could issue licenses around the October 1 National Day holiday, and that the first batch of licenses would only allow the nation's three wireless carriers to operate networks based on the homegrown technology known as TD-LTE. 

According to the latest reports, the MIIT has officially approved four cellphone models for use on the upcoming 4G networks, one each from homegrown giants ZTE (0763.HK; Shenzhen: 000063) and Huawei, one from Korea's Samsung (Seoul: 005930) and one from Japan's Sony (Tokyo: 6753). ZTE has put out its own press release on the matter, saying its Grand Memo LTE model was the first to receive official MIIT nod

All four models can operate on most or all of the seven different technologies that China now uses in its 2G, 3G and upcoming 4G networks, including the TD technologies for 3G and 4G, known as TD-SCDMA and TD-LTE. I personally agree with the pundits who say this approval of the first batch of 4G models is the clearest indicator yet that the MIIT will soon award 4G licenses.

The fact that all four newly approved models can run on TD technologies also seems to confirm reports that TD-LTE licenses will be awarded. Separate licenses probably won't come for another year or more for the more mature, globally accepted 4G technology called FDD-LTE, which is favored by the nation's two smaller telcos, China Unicom (0762.HK; NYSE: CHU) and China Telecom (0728.HK; NYSE: CHA).

China smartphone watchers will note that the list of four approved models comes from three of the nation's top smartphone makers, with the addition of Sony. But equally notable is who wasn't on the list, most notably homegrown players Lenovo (0992.HK), Coolpad and Xiaomi, and then of course Apple.

But the other media report indicates a TD version of Apple's 5S really was on the list, and public disclosure of its approval was only excluded at Apple's request. Sourcing on this report is quite murky, citing only "a knowledgeable person." But this kind of secretive behavior is certainly typical of Apple, and it's well known that the company, which already has iPhone deals with Unicom and China Telecom, is close to a similar deal to offer the phones through China Mobile.

It's quite possible we could see China Mobile announce an Apple tie-up when the new iPhone 5S launches in China, which is likely to happen either this week or next. But a more likely scenario would be a tie-up announcement after the MIIT officially awards its 4G licenses, which China Mobile would quickly follow with news of the launch of its commercial 4G network and its sale of an iPhone model that can run on that network.

Bottom line: China's approval of its first batch of 4G phones indicates 4G licenses will be awarded soon, at which time China Mobile could announce an Apple tie-up.

To read more commentaries from Doug Young, visit youngchinabiz.com

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