China Trade Information

There has been a lot of confusion around China Mobile »”>China Mobile’s (CHL) future prospects in the wireless market. China Mobile is currently building out a 3G network standard known as TD-SCDMA, created in China and rife with protectionist tones and technical snafus. The Chinese Ministry of Industry and Information Technology has mandated that China Mobile build out the standard, but by sourcing all the development work domestically, the standard has lost any global relevance and inter-operability.

Still, the rollout continues unabated as 38 cities are to be up and running by mid-2009. Meanwhile, China Mobile’s two main competitors are likely to get 3G licenses from the government in the globally compatible CDMA2000 and W-CDMA standards. The confusing setup is all part of a broader, concerted effort by the Chinese government to create three globally competitive operators, where before China Mobile was the lone 800lb gorilla. (This earlier post discusses the forced M&A that went on earlier in the year)

Tea Leaves Give Mixed Reading

So the bad news is that billions are being spent on a system that closes off many handset options, including the iPhone. However, compared to its competitors, China Mobile’s billions in capex needed to get rollout moving have been quite modest. The company has only spent $2.2 billion (U.S.) to get the first 10 cities implemented, whereas China Unicom (CHU) and China Telecom (CHA) will need to pony up a combined $36 billion to get their networks set up, as basically, they are starting from scratch.

China Mobile, meanwhile, has received increasing handset offerings for its 3G standard, getting Nokia on board recently to join LG Electronics (LGERF.PK) and Samsung (SSDIF.PK). CHL has also re-opened talks with Apple (AAPL) to work out a deal, one that would likely include Apple designing a dual-band handset capable of running on GSM and TD-SCDMA while shutting off its W-CDMA chipset. We could see something inked early in 2009, but (as with all business plans right now) that is subject to change.

Tags: 3G, CDMA2000, China-Mobile, China-Telecom, China-Unicom, GSM, Nokia, SCDMA, SMS, TD-SCDMA

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