China 3G Update: App Stores & iPhones

The race is on to attract the most 3G customers in China now that all three operators have officially launched services on their new networks.

Operators are using any innovation at their dispoal: Apple Inc. (Nasdaq: AAPL)'s iPhone, Google (Nasdaq: GOOG)'s Android, and mobile app stores all factor into their equations for winning over subscribers.

And what of the vendor spoils for the sprawling new 3G networks, which are still being rolled out? Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) have landed the lion's share of 3G infrastructure business across all three network technologies -- WCDMA, CDMA2000, and TD-SCDMA -- according to IHS iSuppli As of the second quarter this year, ZTE had deployed 610,000 transceivers in all 3G technologies while Huawei had deployed 520,000.

Here's a snapshot on the latest 3G service developments in the country.

China Unicom launches with iPhones
The first official day of China Unicom Ltd. (NYSE: CHU)'s 3G service, branded "Wo," was October 1, and the operator whipped up excitement last week with details about the iPhones it has to offer. The operator is also preparing its own mobile app store.

Unicom will sell the iconic devices from Apple for a hefty 5,000 Yuan Renminbi (US$732) without a contract. On 24-month contracts, Unicom's handset subsidies will range from RMB893 ($130.76) to RMB4,253 ($622.64), while monthly service packages wil range from RMB126 ($18.45) to RMB886 ($129.71). (See AsiaWatch: Unicom Preps iPhone Launch and China Strikes Deal to Sell iPhones in China.)

The iPhone could be a factor in helping Unicom achieve its 3G subscriber acquisition target this year. Unicom aims to have 8 million 3G customers by the end of this year and 150 million 3G customers by the end of 2014, according to Ericsson AB (Nasdaq: ERIC)'s head of WCDMA radio access networks Magnus Ewerbring, who was speaking at the recent Mobile Broadband World conference in London.

Unicom, China's second largest operator, with around 140 million GSM customers, says it already has some 530,000 3G users on its network since a friendly user trial started in May. Of those 3G customers, 430,000 are using 3G handsets and 100,000 are using data cards. (See Unicom Enters Third Phase and China Unicom Plans Massive Capex Hike.) Unicom's 3G network will be the largest high-speed packet access (HSPA) network in the world, says Ericsson's Ewerbring. Since February this year, the carrier has deployed and commissioned more than 100,000 HSPA cell sites, capable of downlink speeds up to 7.2 Mbit/s. At launch, Unicom's network covered 285 cities and by the end of the year, the 3G network will cover 335 cities.

China Telecom's app store challenge
China Telecom Corp. Ltd. (NYSE: CHA) reportedly had 1.3 million 3G customers at the end of June, after launching its CDMA2000 network in April. (See China Telecom Offers 3G Video and China Telecom Turns On EV-DO.)

The carrier's mobile app store, the "E-Surfing Spaces Applications Market," had to be shut down at the beginning of September when the beta trial started because there were too many users at one time, according to reports. Since then, there are more than 10,000 registered users and the number of mobile apps downloaded is more than 20,000, reports Marbridge Consulting. The app store, which has about 500 applications, was jointly developed by Huawei and Sichuan Telecom.

China Mobile's homegrown 3G
China Mobile Communications Corp. , the world's largest operator by subscribers, has not had an easy time realizing its 3G ambitions due to the slow development of network equipment and handsets based on the homegrown TD-SCDMA technology.

According the iSuppli, China Mobile's 3G network covers just 38 cities. The operator plans to cover 238 cities by the end of this year. By the end of 2011, China Mobile aims to have deployed 160,000 TD-SCDMA base stations.

The limitations of TD-SCDMA technology -- namely, the availability and cost of devices and support for international roaming -- have led China Mobile to look ahead to the next generation of mobile broadband and step up its efforts to get TD-LTE (the time division duplex version of LTE) commercialized and supported by infrastructure and device suppliers. (See China Mobile Fast-Tracks TD-LTE , ITU Telecom: LTE in China, China Mobile, NSN Test Femtos, and Taking LTE Global.)

But China Mobile is making efforts to encourage service takeup on its 3G network. In August, the operator launched its own app store, called Mobile Market, which features music, games, videos, and other entertainment applications. (See China Mobile's App Adventure.)

And while China Unicom may have the iPhone, China Mobile has the OPhone. It's not a handset; it's an Android-based software platform for mobile devices optimized for Internet services. More than 20 vendors so far are making devices based on the platform. (See China's Battle of the Vowels, An O for an I?, and China Mobile Turns Up VAS Heat.)

— Michelle Donegan, European Editor, Unstrung

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