China Mobile has been reporting quarterly growth around 21% year on year since Q1 2007 and has already passed 350 million connections. China Mobile is a telecom giant and this success is mainly due to its expansion in rural areas. In contrast, most Western operators are focusing on customer base retention as they compete in markets with penetration often above the 100% mark.
2007 was the year of intense focus surrounding which technology Chinese operators should adopt to launch high-speed services. We expect 2008 finally to be the year of implementation and predict the Chinese government will issue 3G licenses in early 2008. China Mobile has invested in TD-SCDMA network, trialling the homegrown network in 10 of the biggest cities. We can expect China Mobile to launch a series of new services running on the high-speed network in time for the Olympics Games in Beijing, next Summer. In that case, and assuming a fast deployment of the network across the country starting mid 2008, the operator’s TD-SCDMA subscriber base could represent 5-6% of its total connections by 2010.
Figure 2: China Mobile: Technology migration
As an illustration of the opportunities around data usage in China, China Mobile has generated, from its GSM network, 13.8 billion RMB from non-SMS data business overt the first half of 2007. It has also increased MMS usage by 77.5% between 1H2006 and 1H2007. Migrating to TD-SCDMA is an opportunity to generate high revenues from data services such as Internet access and video calling. Such scenario assumes that devices are ready on time for next August, widely available and affordable. A number of manufacturers, from ODMs to OEMs, are already showing devices coming out of their TD-SCDMA platforms, some already looking like the notorious iPhone.
High-speed services: A tale about network coverage
Network coverage is the fundamental factor that will drive the mass adoption of high-speed services, by means of an example, we look at AT&T in USA. Increasing WCDMA network coverage has focussed on the biggest urban areas. For instance, a look at the AT&T coverage map of the US territory gives a clear view of its WCDMA coverage.
Figure 3: AT&T Mobility: Coverage map, USA
Increasing CAPEX in order to improve network coverage is crucial for an operator which aims at offering a wider range of data services. For that matter, AT&T has recently announced a plan to deploy and increase capacity of its WCDMA network during the first half of 2008. This strategic move follows the recent focus on AT&T’s WCDMA HSPA launched in early 2007. By improving its network coverage, AT&T’s WCDMA cellular connections are expected to take over GSM connections by 2010. WCDMA HSPA connections can account for more than half of the total WCDMA connections by that time frame.
Figure 4: AT&T: Technology migration
In a press release published in early December, AT&T announced that 'since 2004, the company has invested nearly 230 million USD on wireless network enhancements to expand coverage, add capacity and grow its 3G network in South Carolina'. However, in Q4 2006, the operator's CAPEX reached over 2 billion USD and its recurring revenues over 8 billion USD. This would suggest that since 2004, AT&T's network expansion would represent just over 10% of its capital expenditure.
China Mobile 2007 CAPEX budget is just below 100 billion RMB, and aims at attracting new customers, launching new data services and improving network coverage. Over the first half of this year, the operator’s CAPEX represented 30% of its operating revenues.
Source: Wireless Intelligence.