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China nears full mobile broadband coverage on back of increased 4G adoption

Move could spur accelerated adoption of e-commerce activities in rural areas and integration of online technologies in traditional industries, such as financial services and manufacturing

PUBLISHED : Monday, 18 July, 2016, 9:26pm
UPDATED : Monday, 18 July, 2016, 11:05pm

China’s mission to put its entire population on the internet is almost complete, as analysts predict full mobile broadband network coverage in the world’s second-largest economy within the next few years.

That development would enable operators China Mobile, China Unicom and China Telecom to hasten the shutdown of their 2G networks and step up preparations for the deployment of more advanced 5G infrastructure, according to analysts from Bernstein and Jefferies.

In addition, full mobile broadband network coverage on the mainland would likely spell the accelerated adoption of e-commerce activities in the vast rural areas and integration of online technologies in traditional industries, such as financial services and manufacturing, under Beijing’s “Internet Plus” initiative.

Elaine Lai, an equity analyst at Jefferies, estimated in a report published on Monday that 92 per cent of mobile subscribers on the mainland would have converted to either 3G or 4G services by 2018, up from 83 per cent projected for next year.

Those forecasts are well above the target set under China’s 13th Five-Year Plan, which drew up a mobile broadband subscription rate of 85 per cent by 2020.

Chris Lane, a senior analyst at Bernstein, has forecast mobile broadband subscription in 2020 to reach a high of 90 per cent.

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“Since 3G has largely been superseded by 4G in terms of coverage and usability, we expect the bulk of mobile users in China to be on 4G by 2020,” Lane told the South China Morning Post.

“We expect 2G services in China to be switched off by then, or most of the 2G spectrum reallocated to 4G.”

The mainland would then be able to catch up with other major economies that have switched off, or scheduled to close, their 2G networks.

Japan shut down its 2G networks in 2010, followed by South Korea at the end of 2011.

Both Australia and Singapore are expected to turn off 2G services next year.

Jefferies’ Lai said “massive tariff cuts have been imposed [by China’s regulators] in the last few years to make 3G and 4G services more affordable and to speed up conversion” of 2G users.

“We think the regulators’ mission is almost complete,” Lai said. “In China, the launch of VoLTE heralds the eventual retirement of both 2G and 3G networks.”

The term VoLTE stands for voice over LTE, which represents the 4G technology known as Long-Term Evolution.

China Mobile, the world’s largest wireless network operator by subscribers, had earlier announced that it would launch VoLTE capability in 260 cities across the mainland by the middle of this year.

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“Before VoLTE’s arrival, 3G and 4G operators worldwide kept the legacy 2G networks because they needed it for voice [transmission],” Lai said. “Now that VoLTE enables voice traffic over 4G networks, operators can eventually phase out 2G and free up spectrum resources.”

China Unicom started its VoLTE trials early this year, while China Telecom planned to launch VoLTE by the end of next year.

As of May 31, China Mobile had 409.316 million 4G subscribers out of a total user base of 835.406 million.

China Unicom had 68.182 million 4G users out of 260.117 million mobile subscribers in the same period. China Telecom, which recorded 205.51 million total mobile subscribers at the end of May, counted 84.55 million 4G mobile users.

David Dai Shu, spokesman for Shenzhen-based telecommunications equipment manufacturer ZTE, said expectations are rife that “China could accelerate the roll-out of 5G mobile services” to support high-bandwidth applications like augmented reality and virtual reality, which 4G networks would be hard-pressed to handle as demand grows.

Bernstein’s Lane said initial mainland 5G deployments could be small, citing China Mobile’s recent equipment test at The Bund in Shanghai as an example.