China Mobile, the world’s largest mobile operator by subscribers, caught most observers by surprise when it announced it intended to buy a 12% in FarEasTone, Taiwan’s number three operator.
The Chinese market leader had expressed the intention to look for acquisitions abroad, focusing on developing markets with big growth potential.
China Mobile is under heavy pressure at home. After years of delays in introducing competition to China’s telecoms industry, it has arrived rapidly during the past three months.
China Mobile, in a sense, has had its hands tied by being told to use the local services, TD-SCDMA, and nothing else. TD-SCDMA is a brave attempt but it is still many years behind the overseas opposition.
As mobile phone makers have been slow and unenthusiastic in developing handsets for TD-SCDMA, China Mobile has many fewer handsets to offer to consumers than its rivals.
Meanwhile, China Telecom, a new entrant to mobile services, has been quick off the mark expanding its 3G services based on CDMA 2000, the standard mainly used in the US, and quickly grabbing new subscribers in the process.
In 3G, China Telecom is confronting China Mobile head-on, focusing on private and leisure use and family products.
Industry insiders say China Mobile, resigned to the fact that it will lose out on 3G due to its uncompetitive technology, is now fully focusing on making TD-SCDMA a core part of the emerging global 4G standard Long-Term Evolution, or LTE.
Far EasTone is to set up a trial TD-SCDMA network in Taiwan. Get that to work properly (it will not be easy) and you can seriously start marketing in China.
The Financial Times adds that there were increasing signs that LTE, rather than Wimax, a technology in which Taiwan’s government and companies have made major investments, will be the dominant 4G technology.
This would give China Mobile, which plans to deploy a pilot network by the end of next year, a new chance.
Key hardware vendors such as Huawei, ZTE and Alcatel-Lucent which has a TDD-LTE research centre in Shanghai, believe that the 4G technology will be mature by 2012. It may be, for China Mobile, 4G will be the saviour. Hence the new investment.
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