China Mobile readying LTE launch amid warnings from Fitch

Ratings agency Fitch has cautioned that China’s upcoming 4G licensing process will “result in inefficient capex” for operators.

The warning coincides with reports that China Mobile, the world’s largest operator, will launch commercial 4G services on December 18.

China Mobile is a major proponent of TD-LTE, which was largely developed within China. The country’s government is accordingly expected to award licences covering this technology before the end of the year, with FDD-LTE licences following in 2014.

While rival operators China Unicom and China Telecom are deploying services based on both the TDD and FDD strains, China Mobile is expected to keep its focus solely on the former, ‘home-grown’ strain. Fitch believes that rolling out networks based on each of the technologies will prove challenging for the operators, particularly since the licences will be issued via separate, non-simultaneous processes.

The agency stated that “running two parallel 4G networks concurrently will prove to be inefficient and lead to higher operating expenses and capex over the longer term.” However, it did note that China Telecom and China Unicom stood to benefit from the fact that FDD technology has been more widely used in international LTE deployments.

China Mobile may be in better stead; its TD-LTE deployment will allow it to augment its 3G coverage, which has thus far suffered. Fitch notes that this is due to “the inferiority of [China Mobile’s TD-SCDMA] technology compared to competitors’ global 3G technologies”, which has resulted in the operator “losing some high-to-middle-end subscribers”.

Indeed, China Mobile’s 4G launch will be welcomed by both Chinese and international vendors, as well as high-end device manufacturers such as Apple, which will finally be able to provide the iPhone to China Mobile’s customers officially.

However, Fitch warns that China’s expensive handset subsidies will not only continue but likely worsen as competing operators feel the pressure. In addition, TD-LTE devices are not currently widespread.

The reports indicate that China Mobile’s service be branded as ‘He’ and will initially launch in Beijing, Chongqing and Guangzhou, with Shanghai following at a later date.

 

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