MAE: Back to the network

If there were one thing Asia's telco leaders agreed on this morning, it's that the network matters.

“All networks are not built the same,” declared Telstra CEO David Thodey at the Mobile Asia Expo keynote.

China Mobile boss Xi Guohua, saddled with the world's most unloved 3G network, readily agreed.

“Infrastructure is still a core competency of operators,” Xi said. “How can we satisfy the needs of consumers? By building the next generation network."

KT's Suk Chae Lee said he was trying to squeeze out network costs by going all-IP, warning that internet firms were now potential network rivals.

“In the old fixed broadband era, telcos were the only network builders and the cost of building a network was not an issue. However, in the new era, competitors like Google and even Amazon are building their own infrastructure, optimised for delivery of content with software-defined architecture.”

Xi and Thodey agreed that pricing would depend on service quality, in turn a function of the network functionality and investment. “[Consumers] will not be happy just with basic service we provide. This is both a challenge and an opportunity for traditional carriers,” Xi said.

But Thodey said the entire customer experience, from the website to the retail store, was critical.

“It's a serious issue. There's such a demand for service I think we are not creating enough value. Are we doing well and are we creating customer loyalty, or are we just doing the basics?”

China Mobile delays giant 4G tender

China Mobile’s massive TD-LTE tender has been delayed because the operator can’t decide whether to build a new network or upgrade from 3G.

The tender, for 200,000 base stations and 100 cities, was originally planned to start in April. Estimates of its value range wildly from $6.75 billion to as much as $30 billion.

However, executives are said to be undecided whether to buid primarily as an upgrade from the existing TD-SCDMA network using F-band spectrum (1880-1920), or to roll out new base stations using the D-band (2570-2620).

It is more than an arcane technical issue. An upgrade would favour the incumbent TD-SCDMA vendors – Huawei, ZTE and small state-owned player Datang Mobile. A new build would put all vendors on a level playing field.

According to 21^st Century Business Herald (posted here on Sina Tech), the tender was supposed to have been issued in April, but will probably not be called until June.

Ericsson China executive vice-president Eric Feng told a briefing in Guangzhou yesterday China Mobile hadn’t yet issued tender documents because executives “still haven’t reached final consensus.”

So far China Mobile has rolled out limited scale TD-LTE trial networks in 13 cities, with contracts allocated among five vendors. The 2013 network is its major commercial-scale buildout ahead of formal launch, which is expected to be in the second half of the year.

Feng told journalists that the trials showed that an upgrade from 3G would suffer from interference and limited network functionality.

His recommendation was pretty much to script. Given these issues, and China Mobile’s tight timetable, Ericsson believed that the “new build is the best option,” Feng said. 

China Mobile iPhone deal by Q3?

Pretty much everyone who watches Apple and/or China Mobile expects the world’s most valuable company and the biggest mobile operator on the planet to stirke an iPhone deal some time this year.

Each for its own reasons needs the other more than ever, while the convergence of 4G standards means the elimination of the TD-SCDMA barrier.

This story in the respected Southern Metro Daily newspaper (Ch)  thus isn’t news, and it isn't definititive, but confirms that China Mobile is thinking along the same lines.

A China Mobile source says the company believes that with Qualcomm’s new convergence chipsets, Apple will no longer have to make standalone phones for Mobile’s standalone 3G network, enabling the pair to work together.

At the earliest, that will happen in the third quarter when the sixth generation iPhone is likely to be released. Qualcomm’s chipset offers five modes - TDD FDD LTE, W-CDMA and TS-SCDMA, and GSM/GPRS – in ten spectrum bands.

China Mobile has built out a trial TD-LTE network in 13 cities and will expand that to more than 100 cities this year. It has begun commercial trials in Hangzhou and Shenzhen. 4G licences have not been issued, but reportedly China Mobile will be the first to obtain one (Ch)  in October.

China Mobile’s TD-SCDMA network doesn’t allow roaming and offers a limited handset choice, causing it steadily lose ground to its rivals in 3G, where it accounts for just 41% of customers. Both its rivals, China Unicom and China Telecom, offer the iPhone.

If Apple and China Mobile do reach a deal, the signs are good. In Guangdong, China’s richest province, China Mobile already has almost as many iPhone users plugged into its 2G network as China Unicom has on its 3G network.

Latest: China Mobile's war on WeChat

China's OTT battlefront is essentially a contest between Tencent, the savvy internet firm, and China Mobile, the mobile titan. In the past week it's become a daily news staple.

The latest is Tencent chief Pony Ma at a public forum on the weekend, denying he has any plan to charge fees for WeChat, Tencent's wildly successful messaging app. 

Just as predictably, he also made a pitch for continued cooperation with the operators, pointing out WeChat was already generating a good deal of traffic. In an interview last week he talked up future joint efforts around machine-to-machine. 

Yet the sheer weight of WeChat fee stories – even the denials – has helped create a climate where people believe paid WeChat is a possibility. The state China Radio news service reported Ma's denial but also went ahead with a voxpop asking people if they would use WeChat if they had to pay for it.

In his denial, Ma avoided addressing the reports that the MIIT had called in the operators and Tencetn to canvass the possibility of paid WeChat.

In that light, the form of words from Tencent’s spokesperson is interesting: “We have not received any advice of any meeting,” he reportedly said. Like his boss he said there was “no plan to charge fees.”

So what’s China Mobile’s game plan? The head of China Mobile Research Institute, Bill Huang, memorably floated the idea of the freecall 800 charging model - ie, called party pays – being applied to mobile data. Sensibly he went on to say merely that this “might emerge in the future.”

Huang complained that because of its always-on function, WeChat occupied 60% of China Mobile’s signalling layer despite accounting for just 10% of data traffic.  But even he said it would be unrealistic for operators to try to squeeze the OTT players because “they represent customer needs.” 

In the same vein, China Mobile CEO Li Yue said technology change was inevitable in the industry, and observed that SMS pretty much wiped out much of the greeting card industry.

Meanwhile, in an amazing coincidence, a China Mobile slide pack was leaked online last week, revealing the firm is considering a revamp of its Fetion messaging service for the WeChat era. Launched three years ago, it has some 99 million active users, up 15% in the last year. 

Given the lamentable record of operators versus apps, Mobile's ambitions are brave. This blog applauds them, however. As long as China Mobile is willing to throw a few punches, those headlines will keep rolling.

China Mobile vs. the internet

China Mobile’s amped-up network investment plan doesn’t surprise in light of its modest result and its recently-expressed views on the rising internet menace.

It yesterday posted a 2.7% rise in earnings to 129.3 billion yuan ($20.8bn) – slightly ahead of estimates, according to a Reuters analysts’ poll, but still the slowest growth since 1999. Net income rose 5.2% in 2011.

Its now promising to spend nearly $31 billion on its GSM, 3G, LTE and Wi-Fi networks this year, including $6.7 billion on 4G. Chairman Xi Guohua says the company’s “mantra” is that “network quality is the lifeline for telecommunications companies.”

But tipping a bucket of cash over the vendor community isn't going to do much about the existential threat from OTT players that supposedly keeps Xi awake at night.

He recently described internet players like WeChat and Skype as a bigger threat than China Unicom and China Telecom - a neat putdown of his smaller rivals as well as a hint that the three are ready to band together to fight off the threat.

The Chinese web is aflame this week with speculation of a “showdown” between the telcos and the OTT guys,  including talk of forcing fees upon Tencent, the company behind WeChat. Tencent has denied this.

For all this, the evidence of serious bleeding for operators is thin.

Total SMS volume grew a little over 2% last year, but the number of texts per user fell 9.45%, as this chart from Marbridge shows. Yet the number declined 7.54% in 2011 and 6.81% in 2010.

Given that WeChat didn’t start until January 2011, it’s hard to see the trend as anything more than the natural decline in user spend.

In neighbouring Hong Kong, PCCW Mobile feels so threatened it’s actually done a deal with WeChat, offering customers all you can eat starting at HK$8 (US$1.03).  Hutchison has been offering a similar deal with WhatsApp since September.

In truth, the crimp in China Mobile’s earnings has come from its TD-SCDMA network handicap and lack of an iPhone. Both those (related) disadvantages will disappear in the 4G era.

In the meantime the company has delivered another reminder that customer-friendly innovation isn’t in its toolkit.