The good times are rolling again for China Mobile. After years of being hobbled by home-grown 3G, the world's biggest operator, boasting more 800 million customers, has a major 4G hit on its hands courtesy of its monster TDD LTE rollout.
In what is probably the biggest and fastest ramp-up of any telecom service, China Mobile Ltd. (NYSE: CHL) has signed up 70 million 4G users during the past year and expects to hit 150 million by the end of 2015. (See China Mobile Adds 9M 4G Customers in August.)
And China Mobile's renewed success is bad news for its domestic peers. Prior to the launch of China Mobile's 4G service 12 months ago, both China Unicom and China Telecom were adding between 2 million and 3 million net mobile subscribers each month. Now, though, Unicom is now signing up fewer than 600,000 a month, while Telecom is in negative territory, having lost 1.4 million customers in the 11 months to November 30.
China Mobile executive vice-president Li Zhengmao told an industry event in Shanghai last November that the operator's 4G radio network would comprise 700,000 basestations by the end of 2014 and break through the 1 million barrier this year. As well as racking up new subscribers, data usage is up fourfold compared with 3G, and ARPU (average revenue per user) is up by about 50%. (See Nokia Networks Unveils $970M 4G Deal With China Mobile.)
He also said the operator had taken three years to sign up 50 million 3G users -- a reminder that its rapid 4G rollout is a reaction to its half a dozen years tied to home-grown 3G technology TD-SCDMA. With limited choice of handsets and uneven coverage, TD-SCDMA never achieved total acceptance from Chinese users: By the time China Mobile received its LTE licence in December 2013, almost three-quarters of its customers were still on 2G (though a 3G customer base of more than 200 million was still substantial).
The 3G years put China Mobile in something of a stranglehold. As well as offloading the TD-SCDMA development cost onto China Mobile's customers and shareholders, its 3G push also allowed its rivals to make up ground: In the 2G era, China Mobile accounted for around two-thirds of industry revenue and earnings, but by the time 4G came along it was accounting for about half of the sector's sales and profits.
So far, 4G hasn't delivered huge gains to China Mobile's bottom line. Even though revenues increased by 3.9% year-on-year to 481.2 billion Yuan Renminbi (US$77.5 billion) for the nine months to September 2014, net earnings actually fell almost 10% to RMB82.6 billion ($13.3 billion), partly because of a new sales tax but also because of its 4G marketing cost. But investors are impressed, pushing up China Mobile's share price on the Hong Kong exchange by 18% since the TDD service debuted at the beginning of 2014.
China Mobile's aggressive push into 4G has also made it a global advocate for TDD LTE. Li and other execs have repeatedly called for TDD and FDD networks to be more fully converged -- a message vendors will find hard to ignore.
The company's strategy is clearly all about leveraging its 4G strengths to ensure it will deal with the expected disruptions during the next half decade better than its competitors.
Li predicts that by 2016, voice and text will account for just 40% of revenue, down from 67% in 2014, while data and digital services (such as IoT, content and apps) that currently deliver a third of revenue now will provide 60% of revenue.
— Robert Clark, contributing editor, special to Light Reading