China Mobile Inks 4G Pact

Apr.12.10 | About: China Mobile (CHL)

China Mobile (NYSE:CHL), the world’s largest wireless carrier by subscriber, has reportedly entered into an agreement with Taiwanese wireless carrier Far EasTone Telecommunications, to jointly build and test a 4G network based on the TD-LTE (Time Division Duplex Long Term Evolution) mobile broadband standard. Far EasTone is Taiwan's third-largest mobile-phone operator by revenue.

Under the agreement, the companies will cooperate to construct a 4G trial network platform, which will offer a field-test environment for TD-LTE equipment and devices supplied by Taiwan-based vendors as well as China Mobile’s “Ophone” branded handsets.

This represents an important step by the Chinese wireless behemoth, which planned to acquire a 12% stake in Far EasTone in April 2009 for roughly $554 million. However, the proposed acquisition was blocked by the Taiwanese government last year. China Mobile is also exploring opportunities for TD-LTE technology collaboration with other Taiwanese companies including Chunghwa Telecom (NYSE:CHT).

China Mobile plans to commence the trial run of its TD-LTE network during World Expo 2010, scheduled in Shanghai (from May 1 to Oct 31, 2010). The carrier selected Alcatel-Lucent (ALU) for the design, construction, installation and integration of communication infrastructure to facilitate the network trial. The TD-LTE network will provide advanced wireless services to the visitors at the exposition.

China Mobile’s TD-LTE venture is being supported by the British telecom giant Vodafone (NASDAQ:VOD). In addition to Alcatel-Lucent, the company has also selected Ericsson (NASDAQ:ERIC), Motorola (MOT) , Nokia Siemens, Huawei Technologies and ZTE Corp as the primary technology vendors for the 4G TD-LTE project.

The TD-LTE network will enable downlink speeds of 60 megabits per second (Mbps), which is 20-30 times faster than the average throughput levels offered by existing 3G networks. China Mobile plans to allocate approximately 60% of its capital expenditure over the next few years to develop its 4G network.

China Mobile’s accelerated development plan for TD-LTE stems from the uncertainties related to the success of its TD-SCDMA technology based 3G services. The carrier is facing challenges regarding the adaptability and performance of this indigenously developed 3G standard.

European and American 3G standards such as WCDMA and CDMA2000, which have been adopted by China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA) , respectively, offer faster network speeds and already have wide acceptability in the marketplace. This may limit wider market adoption of China Mobile’s 3G network.

China Mobile aims to leverage the TD-LTE opportunity to offset the limitations of the TD-SCDMA network. Moreover, this move will also provide the carrier an opportunity to leapfrog its Chinese peers to emerge as the first carrier to deploy the 4G LTE based mobile broadband network in China.