According to a report in today’s South China Post – June 20, 2008, the parent of Hong Kong-listed China Mobile was asked to submit a detailed business plan and budget for the launch of the next phase of the TD-SCDMA service (currently in final “tests” in 10 cities – trial launch will happen during the Beijing Summer Olympic Games). Included in that plan was a MII target to enroll more than 100 million mobile-telephone subscribers within three years – all of whom will use TD-SCDMA technology.
A key question is whether China nation state is willing to saddle their most dominant wireless carrier (Chna Mobile) with an absolute mandate to achieve this lofty 100 million subscriber target? If China is adamant that “TD” succeed, then China Mobile may suffer subscriber losses (to Unicom and Telecom) in the next few years. Why? The TD technology may not be ready for prime time. Thus far, the TD trials have not gone smoothly. The bulky TD towers put out a signal that suffers in urban environments … tall buildings interfere with call quality and cause dropped signals. TD handsets have not sold well (approximately 1800 at subsidized pricing) and deliver less than 2 hours battery life. Some industry sources have blamed the initial TD handsets for the problems, yet other insiders point to technical issues with TD-SCDMA. Can TD-SCDMA’s technical problems be remedied? With ample amounts of money and time, perhaps. The state-owned China Mobile certainly has the resources to double or triple TD tower-sites in cities (to boost signals) if necessary. There are already 15,000 TD towers in 10 major cities. Yet launching TD and building it to “world standard” status is a hugely ambitious project that is already years behind and could take several additional years to complete. China Mobile has privately objected to and resisted this assignment. Their preference appears to be away from “indigenous” (China built) TD-SCDMA and towards the development of the long-term evolution (LTE) 4G standard. But this takes China away from their “made in China” standard, and may result in some loss of face.
One interesting observation is Nokia’s apparent apathy when is comes to TD-SCDMA. In fact, China’s TD-SCDMA Forum had warned Nokia in May 2007 to step up support of the TD-SCDMA protocol. That was then, this is now. Nokia has a massive stake in China and they are very closely allied with China Mobile. While Nokia publicly supports TD-SCDMA, actions or inactions speak louder than words. Nokia recently backed away from providing additional financial support for their TD-SCDMA chipset vendor Commit (financed by Nokia, TI and LG). The Shanghai-based chip provider Commit Inc., one of five authorized TD chip vendors, ceased operations as a result of insufficient funding in May of 2008. Commit’s collapse leaves Nokia without a TD chip partner and a good excuse to dodge their seeming obligation to release a TD handset in China. It should be noted that a Nokia spokesperson has indicated that the Espoo, Finland company will go ahead with manufacture of a TD handset sometime this year.
Commit’s problems are not isolated. A recent C114.net article states that Datang Mobile Communications Equipment is seeking to pull its 32% ownership stake out of T3G Technology, one of the five authorized TD-SCDMA chip vendors.
Another key question is how long China will delay issuance of 3G licenses? If they truly want to set back progress, China can hold on to the 3G licenses for another year or so and thereby keep W-CDMA and CDMA2000 3G in the gates. Doing so may afford China Mobile more time to make TD viable, yet it more likely will keep China from joining the rest of Asia at the cutting edge of wireless standards/technology.
Notwithstanding China’s internal politics and need to save face with TD-SCDMA, there is significant reason to be optimistic about an iPhone deal in China. iPhone 3G will work on China’s current networks (GSM and GRPS/EDGE) and tens of millions in China want iPhone. China’s MII and China carriers all know that iPhone blows away the competition when it comes to subscribers’ use of data (value-added services) and this increases carriers’ average revenue per user (ARPUs).
Apple wants iPhone to “officially” be in China and Chinese citizens want iPhone. Once the restructuring dust settles a bit and the Olympic Games are underway … look for an iPhone announcement(s). An official iPhone deal will get done! And don’t be surprised if both China Unicom and China Mobile get iPhone. Stay tuned.