China Mobile Limited
), the largest wireless carrier in the world by subscriber base,
is banking on its 4G network deployment to propel growth of
) iPhone. CHL wants to commercially launch its 4G technology by
the second half of this year and has also earmarked its 4G
CHL already offers iPhone and has more than 10 million iPhone
users on its 3G network. However, the company's biggest flaw is
that it offers mobile service based on Time Division-Synchronous
Code Division Multiple Access (TD-SCDMA) technology, which is not
very well supported by the handset makers including Apple. On the
3G front, CHL did not perform well, where only 13% of its 715
million customers are 3G, while rival
China Unicom (Hong Kong) Limited
China Telecom Corp. Ltd.
) have performed better with 33% and 44% 3G penetration,
Additionally, most of CHL's customers are prepaid with only a
small number being high margin postpaid customers. Based on these
weaknesses, the company has reported weak financial report for
full year 2012, where profit has increased just 2.7%.
In an attempt to overcome this difficult situation, CHL has
already started to deploy TD-LTE (Time Division Long Term
Evolution) technology and has already launched commercial LTE
service on a trial basis in two cities. The company expects to
offer LTE coverage in 100 Chinese cities by the end of this
With nearly a billion cell phone users, China Mobile offers a
huge smartphone market, which is still being dominated by
Android. Apple's collaboration with CHL will allow the later to
narrow the gap on Android.
China, where 3G network is still being rolled out expects to
grant 4G license in the second half of 2013. According to
research firm IHS, 4G growth is expected to pick up pace
gradually with the maximum growth coming in 2016 and 2017 as 3G
will be phased out by then. They expect LTE to dominate the
Chinese market, with a customer base of 439.9 million by
CHL recently declared that it plans to increase its capital
expenditure by 49% in 2013, with around $7 billion of the
proposed $30 billion investment is expected to be in deployment
of TD-LTE network. TD-LTE technology, which supports iPhone will
boost the company's subscriber growth once it is rolled out
across the country.
Nevertheless, the company might have to provide substantial
handset subsidies and spend heavily on promotional expenses to
attract customers, which might impact its bottom line.
Currently, China Mobile Carries a Zacks Rank #3 (Hold).
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