Regulator Exposes China Mobile’s 3G Exaggeration 官员披露中国移动虚夸3G用户数量

By newsdoug on June 4, 2012

I’ve always suspected that China Mobile (HKEx: 941; NYSE: CHL), the country’s dominant mobile carrier, vastly exaggerates the size of its 3G business, and now it seems like the more authoritative national telecoms regulator agrees with me. The news shouldn’t come as a shock to anyone, but it does provide a clearer picture of how the 3G market is developing in China, an important indicator since high-speed data services that can be delivered over 3G and upcoming 4G networks is clearly the wave of the future. Let’s look at the latest news, which has an official from the Ministry of Industry and Information Technology saying the number of true 3G subscribers in China is probably around 80 million, or about half the combined total reported by China Mobile, along with its 2 main rivals, China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA). (English article) The official puts the blame for the inflated total figure squarely on China Mobile, saying the nation’s top mobile carrier exaggerates its numbers by including many voice-only users among the subscribers for its 3G network. By comparison, Unicom’s and China Telecom’s 3G subscribers use their service for data-related products such as Internet surfing. China Mobile’s latest figures show the company had 62 million 3G subscribers. So if most of the inflation is coming from China Mobile, it’s probably fair to assume that as many as 50 million or more of the company’s 3G users are simply using the service for voice calling, reducing China Mobile’s total figure to a mere 10 million or so. Even that figure could be high, as I have yet to meet a single person who uses China Mobile’s 3G service for Web surfing, with nearly everyone preferring Unicom and China Telecom. Industry followers know the reason for China Mobile’s anemic 3G performance is largely due to the fact that the government forced it to build a network based on a homegrown technology called TD-SCDMA, which has been plagued with reliability problems and lack of handsets. China Mobile has shown signs of planning to boost its 3G efforts following the recent retirement of long-serving Chairman Wang Jianzhou, announcing a steady stream of new handsets and chips for TD-SCDMA phones. But it’s still unclear how serious the company will be on that front, with its new leaders sending out some troubling signals back in April that China Mobile will continue to focus its efforts on next-generation 4G services, which aren’t expected to receive an official license from the MIIT for at least another couple of years. (previous post) Perhaps this latest indirect criticism by the telecoms regulator will embarrass China Mobile into promoting its 3G service more aggressively, which it really needs to do to remain competitive with Unicom and China Telecom. Otherwise, it could not only become a bit player in the 3G space, but could also see its overall market position quickly slip as more and more mobile users migrate to data service plans.

Bottom line: The industry regulator’s disclosure that China Mobile vastly overstates its 3G subscribers reflects the company’s weak promotion of the service and bodes poorly for its future position.

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