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China's mobile giants battle over 4G market

With Beijing's support, 4G technology has taken root in China over the last couple of years. (Photo by Takaki Kashiwabara)

BEIJING/HONG KONG -- China's three big mobile carriers are starting to fight in earnest over the burgeoning 4G market, pouring billions of yuan into infrastructure as Beijing strives to make the country a telecommunications titan.

     China Mobile, China Telecommunications and China United Network Communications Group -- known as China Unicom -- are all vying for a 1.3-billion-strong market.

China Mobile

Signs touting China Mobile's 4G service line the streets of Lanping Bai and Pumi Autonomous County in Yunnan Province, a stone's throw from Myanmar. Even in this mountainous region with a population of just over 200,000 and an average altitude of nearly 3,000 meters, China Mobile phones can pick up a strong 4G signal and connect at the same speeds as in Beijing or Shanghai.

     With a catchphrase boasting of coverage in both big cities and small villages, China Mobile has spearheaded the advent of 4G in China. Around the end of 2013, it started offering commercial 4G service using the TD-LTE standard, on which China's government led development. It boasted 123.38 million users at the end of February, gaining triple the number of LTE users in all of Japan in roughly a year.

     In 2015, "we're aiming to get a total of 250 million [4G] users," Chairman Xi Guohua told a news conference Thursday.

     The carrier already has 810 million subscribers, but just over half are still on 2G. To encourage customers to make the jump to 4G, the company will spend 72.2 billion yuan ($11.6 billion) this year to bring its total base stations to more than 1 million. It had set up stations in 720,000 locations through 2014, covering 1 billion people.

     If the spread of 4G can help diversify the services on offer, the resulting growth in demand would help bolster earnings.

     "My lifestyle has totally changed," says a 27-year-old restaurant employee in Beijing who got a 4G-compatible Apple iPhone 5s for free as part of a China Mobile promotion. The connection speeds, a dramatic step up from 2G, prompted a switch to a 4G contract.

     "I can enjoy movies and music on the go," the worker said.

China Telecom

"We want to make this year the first year of the 4G era," China Telecom Chairman and Chief Executive Officer Wang Xiaochu said at an earnings briefing in Hong Kong.

     While the veteran company has data transfer expertise that stands out even among the three state-owned giants, it was slow to get on board with 4G. Rather than the TD-LTE standard the government focused on, the carrier had opted for FDD-LTE, which was developed from the 3G service it currently uses.

     China Telecom struggled against China Mobile's offensive, losing subscribers on a net basis for five straight months through July 2014. But in February, the company was granted a long-awaited FDD-LTE license. Since it can build up 4G infrastructure by upgrading existing 3G base stations, its coverage area will expand rapidly.

     The company will pour 61 billion yuan into 4G this year, aiming to set up base stations covering 100 cities across China by the end of the year and boost its 4G users to 100 million.

China Unicom

At a China Unicom store on the Wangfujing shopping district in downtown Beijing, the sales pitch is focused on ease of use when it comes to data transmission.

    "The fee plans are pretty much the same everywhere," says a sales representative. "If you're mainly using it for data transfers like Internet browsing, we're the best."

     Like China Telecom, the company is seeking to mount a comeback after gaining an FDD-LTE license in February. One of its main tools is an integrated 4G/3G network. The carrier has more than 100 million subscribers using 3G. It plans to invest around 20 billion yuan this year in 4G, while allowing customers to use 3G where 4G service is unavailable.

     It is looking to expand 3G/4G coverage to 95% of the population this year and lift the number of 4G subscribers to 100 million.

Smartphone makers

The flood of 4G investment owes in part to Chinese government policy. Industry and Information Technology Minister Miao Wei has said that China aims to become a major power in telecommunications, and that Beijing will support speeding up 4G expansion.

     China is expected to become the world's largest 4G market this year, beating out North America in terms of user numbers, and smartphone makers are scrambling to take advantage of this opportunity.

     An Apple flagship store in Wangfujing stocks handsets built specially for each of the big three carriers, but a salesperson pushes for the China Mobile model. Apple has been focusing on its partnership with China Mobile since the two joined hands in December 2013.

     Rival Huawei Technologies' forte is phones capable of holding two SIM cards, allowing them to work on both TD-LTE and FDD-LTE networks. Startup Xiaomi, which has leapt to the top of the market, has also announced a large-screen dual-SIM model.

     The three major carriers had been spending some 200 billion yuan a year on handset subsidies, offering phones to users for free or at a discount. The total is expected to drop to 160 billion yuan in 2015. This year will likely be a critical one for smartphone makers as well.

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