New Mixed Signals from China Mobile, Unicom 中移动和联通释放复杂信号
Wireless leader China Mobile (HKEx: 941; NYSE: CHL) may have new leaders, but they seem to be following the company’s previous tradition of sending mixed signals with new aggressive expansion plans for its trial 4G network as it continues to neglect its current 3G system. The mixed signal syndrome seems also to have spread to rival China Unicom (HKEx: 762; NYSE: CHU), China’s second largest mobile carrier, which is reportedly in talks with Korea’s Samsung (Seoul: 005930) to launch its first tablet PC, giving the cold shoulder to longtime partner Apple (Nasdaq: AAPL), maker of the more popular iPad. These latest news bits reflect the broader reality that China’s telecoms market is in a bit of a state of turmoil, as companies look for advantage following a major government-led industry reshuffle more than 2 years ago.
Further complicating the equation, the industry regulator has sent strong signals in recent months that it plans to open the sector to foreign investment as soon as the end of this year, allowing potent new rivals like IBM (NYSE: IBM) and Vodafone (London: VOD) to enter the market in an attempt to make the sector market more dynamic. (previous post)
Let’s take a look at the China Mobile news first, which is really news from 2 separate reports on the company’s 3G and 4G networks, both based on a homegrown Chinese standard known as TD. China Mobile has largely neglected its 3G networking, which is based on a problem-plagued standard called TD-SCDMA, after being forced to build the system following a government-led industry restructuring more than 2 years ago.
At the same time, it has aggressively developed a 4G network, based on another standard called TD-LTE, which is much closer technologically to other globally accepted standards. The only problem with this approach is that the telecoms regulator has indicated it won’t issue commercial licenses for 4G networks in China for at least the next 2 years.
The latest news bits continue recent trends, with one reporting that China Mobile is delaying the latest tender for a build-out of its 3G network, which is rapidly losing market share to Unicom and China Telecom (HKEx: 728; NYSE: CHA), the nation’s other major telco. (Chinese article) At the same time, the company is continuing its aggressive 4G campaign by expanding its TD-LTE to 3 additional cities, bringing the total to 13 cities nationwide. (English article)
I had previously predicted the company could shift its focus to its struggling 3G network following the recent departure of long-serving Chairman Wang Jianzhou; but these latest pieces of news indicate the company’s new leaders may intend to continue Wang’s previous strategic direction, which won’t bode well for the company’s business in the near term.
Meantime, other media reports are saying that Unicom is in talks to enter the tablet PC business through a tie-up with Samsung, maker of the popular Galaxy Tab series. This plan looks strange to me because Unicom already sells Apple iPhones in China through a longterm tie-up with the US company, and thus it would be more logical for Unicom to try to extend that relationship by offering Apple’s popular iPad tablet PCs. But then again, Unicom has also sent multiple mixed signals over the past year, so this latest garbled message should come as a surprise to no one.
Bottom line: The latest mixed signals from China Mobile and Unicom reflect an industry that remains in flux following a restructuring more than 2 years ago, with more shuffling to come.
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