Doug Young
Doug Young

China Mobile Seeks Partner in TD Misery

The telecoms regulator is likely to ignore China Mobile's latest request to force one of its rivals to build a 4G network based on the homegrown TD-LTE standard.

More than 3 years after receiving the booby prize when China awarded its 3G mobile licenses, China Mobile (0941.HK); (NYSE: CHL) is still sulking about being forced to build a network based on a problem-plagued homegrown Chinese technology and now wants one of its rivals to share the misery. That's my broader interpretation of the latest reports that say China's dominant mobile carrier is lobbying hard for the industry regulator to force one of its 2 rivals to build a future 4G network based on the problematic technology, known as TD.

Before I discuss this latest development, let's backtrack for a moment to give a little context for people who don't follow the China telecoms industry so closely. When China awarded 3G licenses in 2009, it allowed its smallest 2 carriers China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA) to build networks based on 2 globally accepted technologies known as WCDMA and CDMA EVDO, respectively. But it forced China Mobile to build its 3G network using the homegrown TD-SCDMA technology.

Most observers believed the decision was designed to bring more balance to the market, since it would give a clear advantage to Unicom and China Telecom, which collectively controlled just a third of the market, over industry titan China Mobile. Three years later the decision has produced the intended result, with the 3 companies controlling roughly comparable shares of China's 3G market even though China Mobile continues to control nearly two-thirds of the country's broader mobile market.

China Mobile has privately complained about being forced to develop the TD technology for much of the last 3 years, and has made minimal efforts to promote its 3G network even as it more aggressively developed the technology's next-generation 4G standard, known as TD-LTE.

So to return to the present, these latest reports are saying that China Mobile is lobbying the telecoms regulator to force either Unicom or China Telecom to also build a 4G network based on the TD-LTE standard, rather than using globally accepted standards. China Mobile's reasons that forcing another major Chinese carrier to build a TD-LTE network would help to develop the technology more quickly, making it more attractive for other telcos outside China to use it.

From my perspective, this latest move looks like China Mobile is simply continuing to pout over its "bad luck", and I seriously doubt its suggestions will be taken seriously by the regulator when 4G licenses are awarded, which isn't expected for another 2 years anyhow. A number of major gobal telcos, most notably Softbank (Tokyo: 4726) in Japan and Bharti Airtel (Mumbai: BRTI) in India, are already building TD-LTE networks, so it's doubtful that another Chinese telco is needed to give the technology more momentum.

What's more, forcing China Telecom or Unicom to build a TD-LTE network would hurt one of the original goals behind Beijing's original 3G plan, which was designed to create a more balanced mobile market in China. At the end of the day, look for the regulator to quietly ignore this lobbying effort by China Mobile, and to call on the company to focus more on developing its own networks and worry less about the business of its rivals.

Bottom line: The telecoms regulator is likely to ignore China Mobile's latest request to force one of its rivals to build a 4G network based on the homegrown TD-LTE standard.