Mobile operators face 2 types of competition: China Mobile

One is likely to drag down mobile tax.

According to Nomura, as part of the presentation titled “Mobile Operator Strategies”, China Mobile’s chairman highlighted that mobile operators (including China Mobile) are facing two different types of competition: 1) competition  between telecom operators; 2) competition between telecom operators and Internet.   

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Nomura’s view: In our view, the competition between telecom operators tends to drive down mobile tariffs. Separately, the competition between telecom operators and Internet has made it increasingly difficult for the telecom operators to monetize mobile data traffic.

We believe China Mobile is hoping the launch of TD-LTE (homegrown 4G technology) service will enable the company to close the technology gap created by TD-SCDMA (homegrown 3G technology) and WCDMA (3G technology used in most parts of the world). 

White paper on TD-LTE industry developments issued China Academy of Telecommunication Research of MIIT (CATR), TD Industry Alliance (TDIA) and Global TD-LTE Initiative (GTI) jointly published a white paper on TD-LTE industry developments. The white paper forecasted a total of 5mn TD-LTE terminals (data cards, MiFi, CPE, handsets) to be sold in FY13. 

Nomura’s view: As China Mobile group needs time to ramp up TD-LTE compatible base stations from 20,000 by end 2012 to 200,000 by end 2013, we believe a majority of the 4G rollout will be completed in 2H rather than 1H of this year.

China Mobile has a total of 715mn mobile subscribers (of which 95mn is 3G subscribers). Using the 5mn TD-LTE terminals (data cards, MiFi, CPE, handsets) to be sold in China for the full year of 2013, we reckon such volume only represents ~0.7% of China Mobile’s subscriber base. We believe a higher adoption rate of TD-LTE service is more plausible in 2014.