Aggressive network construction for new service pays off, analysts say

China Mobile Ltd, the nation's biggest telecom operator by subscribers, is likely to be the biggest winner in the domestic telecom market competition after receiving both a fourth-generation (4G) network license and the Chinese government's permission to run fixed-line network businesses.

According to the Ministry of Industry and Information Technology, China Mobile, together with other two smaller telecom carriers - China United Network Communications Group Co Ltd and China Telecommunications Corp - were each granted a 4G license.

In addition, the ministry said it is permitting China Mobile to offer fixed-line telecommunications services. Thus, all Chinese telecom operators have the right to run both mobile and fixed-line networks.

A customer considers a new 4G phone in a China Mobile service hall in Beijing.[Photo/China Daily]

"It is big good news for China Mobile, since the company waited for the 4G license for a long time," said Xiang Ligang, a Beijing-based telecom expert.

In the three years following China's rollout of 3G telecom services, China Mobile was under pressure for adopting a relatively inferior homegrown 3G standard, and some of its customers migrated to China Unicom and China Telecom, Xiang said.

"Since more people use smartphones, China Mobile's current wireless network is congested and fails to deliver good voice or data services. An LTE 4G network will be very helpful in relieving the company's burden," Xiang added.

Though all of the three telecom operators got the 4G licenses, China Mobile has done the most comprehensive preparations.

"China Mobile has been much faster than the other two carriers in terms of 4G network construction in various Chinese cities," said Wang Ping, chief analyst with research firm Forrester.

"Compared with China Mobile, China Unicom and China Telecom lacked incentives to promote TD-LTE networks. Both of the latter two have invested huge amounts to launch 3G networks," Wang added.

China Mobile posted unsatisfactory financial results in recent quarters, largely due to its huge investment in 4G and intense domestic competition. The company said its net profit fell by 1.9 percent year-on-year during the period - the first net income decline since it listed in Hong Kong in 1997.

Net profit in the third quarter ending Sept 30 was disappointing, as China Mobile recorded a net income of 28.4 billion yuan ($4.6 billion) in the period, down 8.8 percent year-on-year.

The 4G rollout will help China Mobile win back consumers, especially if the company teams up with Apple Inc to unveil iPhone devices supporting the TD-LTE network, Xiang said.

It has been reported that China Mobile will launch iPhone products on contract in mid-December, but officials from the company declined to respond on Wednesday.

China Mobile has built more than 22,000 4G base stations in 15 Chinese cities, and it plans to set up 200,000 base stations in 100 cities by the end of the year.

China Unicom and China Telecom have expressed their willingness to adopt the Frequency Division Duplex-Long Term Evolution, or FDD-LTE, technology, or at least build a converged network under TD-LTE and FDD LTE standards.

Lu Yimin, general manager of China Unicom, said in June that the company was conducting tests for 4G wireless networks with mixed technologies.