China Telcos In New Drives at Home, Abroad 中国三大电信运营商海内外发力

By newsdoug on January 5, 2012

3 telcos in new product launches for 2012 China’s 3 telcos are all in the news in this first week of the new year, with China Unicom (HKEx: 762; NYSE: CHU) making a long-awaited iPhone announcement, while an intriguing newly announced chip could give a big boost to China Mobile‘s (HKEx: 941; NYSE: CHL) 3G service. Last but not least, China Telecom (HKEx: 728; NYSE: CHA) has announced an interesting move abroad, with potentially more to come. Let’s start with Unicom, which after months of delay, will finally start selling Apple’s (Nasdaq: AAPL) newest iPhone 4S on January 13. (English article; Chinese article) This news comes as other media are reporting that Unicom will also soon launch 8 new low-cost smartphones (English article), after the company blamed a shortage of such models last year for its disappointing progress in the 3G space. These latest Unicom developments look like a step in the right direction after a disappointing year in 2011, but I still have big doubts about the company’s ability to execute due to ongoing management turmoil that led it to squander a golden opportunity for growth in 2011. (previous post). Meantime, chip developer Spreadtrum (Nasdaq: SPRD) has announced an interesting new low-cost chip designed specifically for China Mobile, which can handle the company’s homegrown 3G standard, TD-SCDMA, along with its 2G EDGE standard and also wi-fi, which the company is strongly developing. (company announcement; Chinese article) If this chip is good, which looks like a strong possibility, we could soon see a strong new field of low-cost products coming out that could be very attractive for China Mobile customers, helping it to regain some of its lost momentum this year as a new generation of leaders put their mark on the company. (previous post) Finally there’s China Telecom, which will start offering a mobile service under its own name in Britain with plans to expand to France and Germany. (English article) The move will make China Telecom China’s first telco to become a mobile virtual network operator (MVNO), as it looks to cater to the growing number of Chinese living overseas. I applaud China Telecom for its effort to look for new business opportunities abroad, though the VMNO model has been notoriously difficult and only a few companies have really succeeded in the space, such as Britain’s own Virgin Group. That said, I would give this initiative only a 20-30 percent chance for success, but would expect to see China Telecom trying more similar innovative overseas initiatives in the next 2 years.

Bottom line: New products from China Unicom and China Mobile could breath new life into their 3G business this year, while an overseas move by China Telecom is likely to fail.

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