LTE in China: What to expect?

Construction of TD-LTE networks has accelerated as China Mobile is to launch the largest bid in 2013 for base stations. The plan calls for a total of 200,000 TD-LTE BTSs and prospective equipment makers are expected to submit their offer by June.

If everything goes as planned, LTE will be deployed in more than 340 cities but the focus is in some 100 major markets where demand for wireless broadband is strong.

China Mobile wants LTE to cover as many as 300 million people. In the meantime, China Mobile will also put in 110,000 new TD-SCDMA BTSs to support continuing growth of 3G and data traffic, and a step-up for TD-LTE upgrade in the future since the two share the basic transmission scheme.

The procurement is estimated for RMB20 billion (US$3.2 billion), nearly half of what China Mobile has budgeted for LTE construction for 2013. Actual spending may vary by things like quotes by potential bidders, price negotiations and installation. It is not clear if RMB20 billion will be used in the bid or there will be subsequent add-ons as it is often the case in China. Nonetheless, it is clear China Mobile will spend the most on LTE this year as rivals China Unicom and China Telecom remain lukewarm.

Eight companies are expected to participate in the bid, including Huawei, ZTE, Datang Mobile, Potevio, FiberHome as well as Ericsson, Nokia-Siemens and Shanghai Bell which is owned by Alcatel Lucent. While the Chinese could snatch up a large share given their advantage in operator relations and competitive pricing, companies like Ericsson should boost sales as an undisputed leader in LTE technology.

While TD-LTE presents a somewhat uncertain outlook for China Mobile, it could be a “switcheroo” from ill-fated TD-SCDMA. For one, TD-LTE has broad support from equipment vendors and chipmakers; it is a proven platform being used in a few countries; also, China Mobile has done extensive testing in a dozen cities without major technical issues. Despite determination and strong financing, it will take time to see if TD-LTE will lift China Mobile from the doldrums of TD-SCDMA that has hurt the company profit for several quarters.

Another uncertainty is spectrum which equipment makers say will directly affect price and delivery. Three spectrum bands were used during testing, 1900MHz (Band F), 2300MHz (Band E) and 2600MHz (Band D), where Band F was mainly for sites with co-located TD-SCDMA BTSs and Band D for new LTE BTSs, while Band E was used for indoor coverage. At present, Band F is being used by “Little Smart” service – an antiquated quasi-mobile service that is being phased out, thus has limited bandwidth for national coverage, but it can cover larger areas with higher signal propagation. Band F can also be used for TD-SCDMA/LTE co-location with minimal hardware swapping and software upgrade. For Band D, the government has allocated 190MHz for TD-LTE service (2500-2690MHz), large enough for national service and is also consistent with international norm (for roaming) and standardized equipment.




License is another cloud hanging over LTE launch. The MIIT, a regulatory body for the telecom industry, is tight-lip about the time and number of licenses, but most in the industry believe LTE license should be awarded in a few months even if China Unicom and China Telecom do not have a clear plan for the service. To avoid conflict with company interest and criticisms of political pressure, a possible scenario is license as a “blank check”- without pre-conditions like TDD or FDD, so that operators can decide what to do.

For China Mobile, an LTE license is long overdue. Since 2012, the operator has been building LTE networks in more than a dozen cities with about 20,000 BTSs. Earlier this year, China Mobile began trial service in Hangzhou, Shenzhen and Guangzhou where volunteers try the service via a dongle or LTE-WiFi gateway for WiFi-capable handsets. The average downlink speed is 40-50Mbps, ten times faster than 3G service, but the trial is limited to a small number of customers because of lack of LTE handsets.

Late last year, China Mobile ordered 77,000 units for the trial service to be delivered by the summer, but most are dongles and modems not handsets. The operator plans to buy 1.2 million LTE terminals in 2013, again, few handsets. The initial purchase is about 160,000 and bulk supply is expected during the third quarter.

Delays in LTE handsets will likely put a damper to public demand due mainly to chipset supply which inevitably affects handset production. China Mobile requires LTE handsets be backward compatible with TD-SCDMA and GSM, making only a handful of manufacturers to the task including Qualcomm, MediaTek, and Spreadtrum and Marvell to a lesser degree, and it will take time to rev up volume production. Price is another issue. Customers will shun LTE in favor of 3G if the price for smartphone is steep. These days, for RMB1,200 (US$190) or less, one can buy a decent 3G smartphone with a quad-core CPU, 4.5-inch display with 720P resolution.

Even if handsets are ready, TD-LTE is still facing competition. China Unicom, while still weighing its options for LTE FDD and investment scale (capex is reportedly between RMB5-10 billion this year), can still woo potential customers with HSPA+ which delivers up to 21Mbps in all areas covered by WCDMA, not to mention reliability and lower rates. Nonetheless, a license will likely stoke up the LTE playing field that forces operators to engage or face the risk of losing high-end customers who generate more data volume and contribute most ARPU. In this regard, the end result is far from set even though China Mobile appears to hold an upper hand for now.

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