All three of China’s telecom operators are losing money on their 3G operations, according to a new report from Sinolink Securities.
That’s a surprise, since China Telecom has been racking up users rapidly, and you would have thought they would be making a profit at least.
It turns out though, according to Sinolink, that it is China Unicom which is expected to hit profitability first. China Mobile, of course, has been saddled with the worst 3G technology, China’s own TD-SCDMA standard, which is heavier and more erratic than the two global standards used by the two others. China Mobile’s phones look like bricks as a result and it can’t shift its 3G packages no matter how much advertising it commissions.
The reason for the poor returns? Apparently there has been a low take-up among customers, with fewer than 15% switching over. To entice the customers, the companies are slashing the price and increasing the usage limits, but so far they have not succeeded in reaching the right balance.
Since a large number of Chinese websites are text, rather than picture, based, it could be that 3G does not offer a significant enough upgrade from 2.5G to persuade people to switch. It could also be that the more wily customers are waiting for 4G, a technology that China Mobile in particular is rushing to develop in order to dump the albatross of TD-SCDMA off its neck.
The three companies have now invested over 200 billion yuan ($29 billion) on their respective 3G networks, but they are now cutting back their spend in the face of the slow growth. This year, investment is due to drop by 21.2%.