4G market set to ignite hot competition

Foreign companies vie for a slice of the potentially lucrative action

Foreign telecom companies are keen to join China's fourth generation (4G) mobile network deployment with the country looking likely to issue the relevant licenses as early as this year.

Minister of Industry and Information Technology Miao Wei said the country is expected to award 4G licenses to domestic telecom operators by the end of 2013.

Miao's words have helped fuel the enthusiasm of telecom industry players, both from China and abroad, to participate in the hunt for a sizable share in the world's largest 4G market where there are more than 10 billion cellphone subscribers.

Competition

Global telecom equipment giants, including Ericsson AB, Nokia Siemens Networks and Alcatel-Lucent SA, as well as the world's leading chipset and device manufacturers such as US-based Qualcomm Inc and South Korea company Samsung Electronics Co, are preparing to do battle in China over the 4G market.

It is easy to see how attractive the Chinese 4G market is after China Mobile Ltd, the nation's largest telecom operator, announced its capital spending would jump 49 percent year-on-year to 190.2 billion yuan ($30.5 billion) in 2013. More than half of the company's spending on networks - 42 billion yuan - will go on 4G projects this year.

High-level executives from two smaller wireless carriers - China Unicom (Hong Kong) Ltd and China Telecom Corp - also revealed they are conducting 4G trials.

The world's largest Long-Term Evolution (LTE) 4G vendor Ericsson expressed an ambition to achieve a better performance in China this year.

"We are not satisfied with the results Ericsson achieved in China Mobile's first-round 4G bidding last year," said Mats H. Olsson, senior vice-president of Ericsson Asia-Pacific, during the 2013 Mobile World Congress held in Spain in February.

"In the past Ericsson paid a lot of attention to countries including the United States, Japan and South Korea and mainly focused on the deployment of FDD LTE networks. Now we have turned our sights on China and TD-LTE technology," Olsson said.

He expects China will become the world's biggest 4G market. Therefore Ericsson will ensure it is fully prepared and strive to lift the 4G market share in the country, he said.

The Time-Division Long-Term Evolution (TD-LTE) technology and the Frequency-Division Duplex Long-Term Evolution (FDD LTE) technology are two variants of the LTE 4G standard.

The TD-LTE technology is a Chinese homegrown 4G standard and is actively promoted by China Mobile. However, unlike the wide-range adoption of FDD LTE technology, the deployment of TD-LTE commercial networks is still limited.

Markus Borchert, president of Nokia Siemens Networks China, said 2013 is a very important year as eyes are turning to China and China Mobile's 4G activities.

Nokia Siemens Networks, based in Espoo, Finland, is the No 2 LTE player globally and No 1 LTE player in Asia by sales. "We are very happy to see the strong leadership role China Mobile is taking to drive the TD-LTE eco-system. I think that is very good for the industry," Borchert told China Daily.

China Mobile is conducting large-scale 4G TD-LTE trials in 15 cities including Beijing, Shanghai and Guangzhou. The Ministry of Industry and Information Technology predicts an investment of 500 billion yuan in trial network construction and more than 1 trillion yuan after commercial use begins.

In addition to 4G benefits to telecom equipment makers, Bryan Wang, vice-president and principal analyst at Forrester Research, said the potential commercial rollout of the 4G LTE network has also lured networking vendors such as Juniper Networks and Cisco Systems Inc.

"China's economic slowdown last year had a negative effect on international IT companies but 4G construction is rising and has been a highlight," Wang said.

4G fever

Compared with the TD-LTE technology, its predecessor - Time Division Synchronous Code Division Multiple Access (TD-SCDMA), attracted much less industry support. Although the Chinese-developed TD-SCDMA was set up as a global 3G standard, its use was limited to within China.

There has been a significant contrast between foreign companies' commitments to China's 3G and 4G technology. Tina Tian, chief telecom analyst with Gartner's China office, said it is because TD-LTE could introduce a much bigger business opportunity for participating companies.

"The globalization of TD-LTE technology is proceeding well. Countries such as Japan and Saudi Arabia have even overtaken China to offer commercial services," Tian said.

China Mobile Chairman Xi Guohua said he is very excited that TD-LTE has become a global 4G standard. "The TD-LTE technology is very popular across the world. I am confident it will account for 50 percent of the LTE industry in the future," Xi told China Daily.

There is another incentive for foreign companies fiercely grappling with 4G opportunities - the sluggish telecom spending by the world's operators, said Xiang Ligang, a Beijing-based industry insider.

"Mobile operators have been reducing their investments as they grapple with a sharp downturn in their revenues," Xiang said. So major telecom equipment companies, including Ericsson, Nokia Siemens and ZTE, have experienced a tough financial situation and some of them have to lay off staff and sell assets to cut costs.

"The industry downturn forced companies to look for a business sector that has high growth rates. Of course, 4G business has the potential," he added.

TD-LTE war

Chang Gang, chief marketing officer of Ericsson China, admitted Ericsson faced tougher competition in the TD-LTE field than in the FDD LTE area.

Foreign telecom equipment vendors achieved less than a 30 percent market share in total during the first round bidding of China Mobile's TD-LTE tender. Chinese rivals Huawei Technologies Co acquired a 23.8 percent share and ZTE Corp managed 22.1 percent, according to figures from research firm IHS iSuppli.

Pricing strategy is one of the reasons that international telecom companies failed to beat local rivals, Zhao Hailin, an analyst at IHS iSuppli, said.

"Chinese companies such as Huawei and ZTE usually adopt a more flexible pricing strategy," Zhao said. Foreign companies demanded a more expensive price. In addition, Chinese carriers prefer to offer more contracts for domestic companies.

"Ericsson is not going to enter a price war," Chang said. For TD-LTE going global, it is important to allow more industry players to join the game. Since Ericsson has a unique position in the world's LTE industry, the company can introduce more value for China Mobile, he said.

"We all want to see TD-LTE becoming a truly global standard, not only a Chinese standard," Chang said.

Borchert at Nokia Siemens Networks expressed a similar view. "For TD-LTE, we need to learn from the experience of 2G and 3G. The 2G GSM network enjoyed a big global eco-system and was also deployed by major operators," he said.

As a result, GSM became a great success. "For TD-LTE, it is very important to learn lessons from the success of GSM, which means we need to create a strong supplier base and a strong global eco-system," Borchert said.

"Nokia Siemens Networks has a very compelling proposition for China Mobile. Based on our strong support, we can help drive TD-LTE to develop global adoption," he added.

China Mobile

China Mobile plans to deploy the world's biggest 4G LTE network in more than 100 Chinese cities this year, covering more than half a billion people, the company's chairman Xi Guohua, said in a keynote speech at the global TD-LTE Initiative summit in Barcelona.

Meanwhile, China Mobile is about to acquire more than 1 million TD-LTE terminals, including smartphones and data cards, in 2013, Xi said.

The company constructed 20,000 TD-LTE base stations and expects to expand the figure tenfold this year.

The number of China Mobile 4G subscribers is forecast to reach 228.8 million in 2017, representing 52 percent of China's 439.9 million total 4G users, according to estimates by IHS iSuppli.

Contact the writer at shenjingting@chinadaily.com.cn.