China Telecom Eyes 4G Launch, China Mobile Gets Aggressive

Includes: CHA, CHL, CHU
by: Doug Young

With the 4G telecoms era now formally begun, China’s 3 major telcos are suddenly rushing to give out more details about their plans in this new era of high-speed mobile communications. In the latest news from this fast-moving story, media are reporting that China Telecom (NYSE:CHA), the smallest of the nation’s 3 wireless carriers, will formally launch its 4G brand as soon as later this week. Meantime, leading telco China Mobile (NYSE:CHL) has disclosed pricing plans that look quite aggressive for its 4G service in the city of Chongqing. I should also add I’m not surprised that we haven’t heard anything yet from the nation’s third telco, China Unicom (NYSE:CHU), which has a recent history of slowness and disorganization in response to such major new developments.

This flurry of 4G news comes after the telecoms regulator last week issued licenses for the nation’s 3 major telcos to start offering 4G service. In a widely expected move, the Ministry of Industry and Information Technology (MIIT) only gave the 3 major telcos licenses to offer 4G service based on a homegrown technology called TD-LTE. China Mobile has already built an extensive TD-LTE network. But Unicom and China Telecom would prefer to build networks based on the more globally accepted standard called FDD-LTE, and many expect the MIIT to issue 4G licenses for that standard sometime in 2014.

With all that background in mind, let’s start our latest 4G roundup with a look at China Telecom, which is reportedly planning to launch its 4G service in the near future, perhaps as early as December 10. (English article; Chinese article) Media reports say China Telecom has already chosen a name for its 4G service, but company officials declined to give the name. China Mobile is planning to formally launch its 4G service on December 18, and previous media reports said it would use the brand name He, translating roughly to peace or harmony. (previous post)

The big question for the China Telecom launch will be how it plans to offer service. The company had previously indicated it didn’t plan to build a TD-LTE network. Instead, it had said it would lease capacity from China Mobile’s network initially and then build and operate its own FDD-LTE network after it gets a license for that technology next year. That kind of strategy makes sense, as it would be quite expensive and redundant to build 2 separate 4G networks.

The big issue for China Telecom will be how to migrate customers to its own FDD-LTE network next year, since anyone who signs up for its 4G service in the next few months will need to use a TD-LTE handset. I expect we’ll see some announcements soon about new handsets that can operate on both the FDD and TD 4G standards, and that China Telecom and possibly Unicom also will offer such handsets for their early 4G subscribers.

From there let’s take a look at China Mobile, whose Chongqing subsidiary has announced that its 4G price plans will start at a quite reasonable 50 yuan ($8.20) per month. (Chinese article) The new plans are actually 20 percent cheaper than comparable plans for China Mobile’s 3G service. That’s not too surprising, since China Mobile never really aggressively promoted its 3G network, which used another problem-plagued homegrown technology called TD-SCDMA.

The new Chongqing plans will include quite a big data allowance, with the 50 yuan plan including 600 megabytes and a 70 yuan plan including 1 gigabyte of data. I expect we’ll see equally aggressive pricing plans by China Mobile throughout the country, as it will need to offer such low prices to win over data customers after all of its 3G problems. But such aggressive pricing should help it to quickly pick up 4G customers, and I’ve previously said I would expect to see China Mobile sign up as many as 10 million 4G subscribers within the first 2 months of launching service.

Bottom line: China Telecom is likely to roll out dual-mode TD-LTE/FDD-LTE phones for its 4G service this month, while China Mobile will offer aggressive 4G price plans to quickly gain subscribers.