Unicom Picks FDD 4G, China Mobile Counts Down To iPhone

by: Doug Young

After 2 weeks of silence following the long-awaited issue of 4G mobile licenses, China Unicom (NYSE:CHU) is finally making some hints about its strategy in the new era of high-speed telecommunications. I’m usually quite negative about the company due to its disorganization and lack of focus, but for once I have to compliment it for a strategy that looks reasonably well conceived. Meantime in other 4G news, the final countdown to China Mobile’s (NYSE:CHL) iPhone launch may finally be nearing an end, with speculation that announcement of the long-overdue tie-up could come as soon as Wednesday.

Let’s start with Unicom, as I’ve gotten quite tired of writing about a China Mobile-iPhone deal which has been rumored for much of the last 3 years. Unicom, the second largest of China’s 3 mobile carriers, was previously sending mixed messages about its plans for 4G over the last year, reflecting its broader internal disorder. The latest signals over the summer had the company saying it would build two 4G networks, one based on the homegrown Chinese standard called TD-LTE, and another based on a more globally mature standard called FDD-LTE.

Unicom took the dual approach because China was expected to make its first batch of 4G license awards for networks based on TD-LTE technology, with FDD-LTE licenses expected to follow around the middle of next year. Unicom’s current 3G network is more compatible with the global FDD standard, but it wanted to build a TD network to take advantage of the earlier award of TD-LTE licenses. The 4G licenses issued 2 weeks ago by Beijing are for TD-LTE networks, and there’s no official word on when FDD licenses may come.

Now we’re getting word that Unicom is largely abandoning its TD-LTE plans, and aims to focus its resources on building an FDD-LTE network. (English article; Chinese article) The strategy looks similar to that of China Telecom (NYSE:CHA), the smallest of China’s 3 wireless operators, which has said from the start that it will only build an FDD network.

According to the reports, Unicom still plans to build a limited TD-LTE network that will offer data services in some cities with the heaviest demand. One report says that in a recent Unicom tender for 52,000 new 4G base stations, the big majority of 42,000 were for FDD equipment and 10,000 were for TD.

I’m happy to see that Unicom has finally decided to largely abandon TD-LTE, since the construction of two 4G networks would have been quite costly and also created numerous technology integration challenges. Perhaps this is an early sign that after years of disorder and lack of focus, Unicom is finally settling into a more stable state and could finally start to realize some of its big potential.

From Unicom let’s look briefly at the latest iPhone gossip, mostly because I want to go on the record with the news just in case a formal announcement comes later this week. The latest reports say China Mobile may announce an iPhone plan as soon as Wednesday when it formally launches its 4G service. (English article; Chinese article) The reports look highly speculative, as none cites any industry insiders saying there’s a specific iPhone launch coming this week. It’s possible that such a launch may still be several weeks away, since China Mobile and Apple (NASDAQ:AAPL) just signed their iPhone deal just 2 weeks ago, and more time may be needed to work out logistical and technical issues. (previous post)

One report points out the new iPhone deal will probably only provide a short-term boost for China Mobile, since Apple has lost some of its attractiveness over the last year due to negative media publicity and a boom in lower cost smartphone alternatives. I agree with this view somewhat, though I also do think the pairing of the world’s largest mobile carrier with the world’s biggest tech firm will be too big a story for media and consumers to ignore when the announcement finally comes.

Bottom line: Unicom’s decision to largely scrap TD-LTE and focus on a single FDD-LTE 4G network looks smart, while China Mobile’s iPhone deal will give it a brief boost when it launches its 4G service.

Disclosure: None