China Mobile: 4G Leapfrogging 3G Growth By a Margin

  • China Mobile is the world’s largest mobile operator with more than 816 million mobile subscribers almost bigger than all subscribers in USA+Japan+Korea+UK+Germany combined.
  • This is the scale China Mobile possesses and is huge for all players in the ecosystem.
  • However, China Mobile exactly 18 months ago was struggling to push the huge 2G subscriber base to 3G TD-SCDMA with overall 3G subs penetration being at  23%  in spite of 3G handsets becoming cheaper, 3G coverage getting better
  • It took almost 60 months (or 5 years)  for 3G subs penetration to reach 25% of the total subscriber base whereas for rival China Unicom, WCDMA based operator took almost half the time to reach 25% penetration.
  • This means China-Mobile’s own grown TD-SCDMA network can be seen as a debacle for the world’s largest operator and it definitely lost the plot to excite the user base to upgrade in spite of subsidies as well as cheaper 3G handsets
  • However, since the launch of China’s first LTE network (based on TD-LTE cellular access technology) since some 16 months ago, things have turned around for China Mobile
  • The 4G service launch can be seen as an inflection point for China Mobile to attract subscribers to a faster and efficient 4G network.
  • It has taken just 16 months for 4G subscribers penetration to already cross the 20% penetration mark. In other words, it took more than  57 months for China Mobile’s 3G subscribers to cross 170 million mark whereas in comparison it took just 16 months for 4G subscribers to reach the same milestone
  • 3G+4G subscribers now approaching almost 50% of the total subscribers on China mobile network at the end of May 2015
  • This also makes China Mobile the largest 4G LTE operator in the world on track to cross 250 million LTE subscriber mark this year
  • The key reasons for this can be attributed to
    • Smartphones now account 9 out of ten mobile phones sold in China
    • Out of those, more than 8 out of 10 smartphones sold were LTE capable in Q1 2015
    • Maturing smartphone and internet savvy user base looking to upgrade their smartphones and experience
    • Availability of cheaper LTE smartphones (as low as 400yuan) within a year of launch has also helped immensely
    • Push from supply chain with cheaper LTE related components also driving the ASP down for LTE devices in China
    • Additionally, proliferation of cost-competitive open market LTE smartphone sales through online channels also helped drive 4G adoption
    • The rise and maturing of OTT apps and services (communications, multimedia) has been another factor for consumer uptake of 4G devices and services faster than in the 3G TD-SCDMA era
    • Aggressive promotions and roll-out of 4G network coverage from China Mobile another factor to drive this trend. The operator has learnt from its mistakes from the TD-SCDMA era.
  • We see this to become a commonplace phenomenon in other markets such as India, Indonesia, Malaysia and others where 4G uptake will be higher and faster than what it has been for 3G
  • Thus we recommend the entire supply chain, OEMs and even operators to be prepared to roll-out components, devices and networks faster and in greater scale than previously anticipated

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