TELECOMS: China Mobile Tackles WeChat With New Platform
Bottom line: China Mobile’s new unnamed social networking platform based on RCS technology has a 50-50 chance of posing a serious challenge to WeChat due to the many advantages it will enjoy from its China Mobile connections.
After 2 years of standing on the sidelines as Tencent’s (HKEx: 700) WeChat rapidly stole its text messaging business, leading telco China Mobile (HKEx: 941; NYSE: CHL) is finally preparing to fight back with its own competing product offering, according to ZTE (HKEx: 763; NYSE: CHL), which is supplying networking equipment for the product. ZTE’s cloud computing chief Zhu Jinyun told me the new product will be an entire platform for social networking and other services based on rich communications suite (RCS), a technology developed by a global telecoms association.
I’m admittedly not too familiar with RCS, though some web searches showed it’s a platform that allows for a wide range of functions, from one-on-one instant messaging to group chats, file transfers, IP voice calls and location-based services (LBS). Anyone looking at that list will instantly recognize that many of those features are already present on WeChat, whose popularity has rapidly siphoned texting business from China Mobile and the nation’s other telcos.
I’ve written several times about China Mobile initiatives that look aimed at challenging WeChat, but this looks like one with the best potential. That’s because this effort involves an existing technology, RCS, which China Mobile can modify for its own purposes, much the way that smartphone makers currently use Google’s (Nasdaq: GOOG) Android as the basis for their own customized operating systems. The platform is also optimized for use over China Mobile’s 4G network, which is rapidly picking up new subscribers and recently crossed the 100 million mark after its launch a year ago.
This particular system could also be more reliable and stable than WeChat, since it will run mostly on China Mobile’s own network. By comparison, WeChat’s many services rely heavily on the Internet, which means they are sometimes slow and less stable. Lastly, the use of a globally developed platform should also result in better interoperability between Chinese Mobile’s users and people in other global markets. That kind of interoperability should help users of the China Mobile platform to easily link up with peers in other countries, mirroring an advantage now held by operators of more global rival services like Facebook (Nasdaq: FB), WhatsApp and Line.
ZTE’s Zhu discussed the project with me on the sidelines of a major trade show in Spain, following his company’s recent receipt of a contract to build the infrastructure for the China Mobile platform. He said the service has yet to be given a formal name, and should launch later this year, most likely in the first half. The initiative is designed to ride on top of China Mobile’s high-speed 4G network, and China Mobile has previously said it is aiming to sign up 250 million 4G users by the end of this year. Zhu disclosed that initial infrastructure being supplied by ZTE can support up to 100 million users on the platform, hinting at the scope of China Mobile’s plans.
China Mobile’s response to WeChat has changed rapidly over the last 2 years. It initially tried to force Tencent into a revenue-sharing agreement, after complaining to the regulator that heavy WeChat usage was clogging its network. It later abandoned that approach after being rebuffed by Tencent, and earlier this year announced the formation Migu, a unit dedicated to developing Internet content and services. (previous post) I suspect that this new RCS platform will be one of Migu’s first major initiatives, and will be featured prominently on home screens of China Mobile phones.
This new platform should have a moderate chance of success due to the many advantages it will have that I’ve described above. But execution will also be important, particularly in terms of product design, which is one of Tencent’s biggest strengths. China Mobile has far less experience in that area, though it should get some help by using a globally developed technology. At the end of the day, I would give the platform a 50-50 chance of winning the 50-100 million users by the end of this year that China Mobile appears to be targeting. Now we just have to wait for a formal announcement, including the name for this new platform and service.
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