China has become the largest consumer of mobile phones and, on a voice usage basis, the largest service market in the world. The aggregate number of mobile subscribers of the three main telecom operators (China Mobile, China Telecom and China Unicom) stood at approximately 823 million as of the end of November 2010. According to the statistics released by these three, China had 42 million 3G subscribers at this time, China Mobile leading with a share of 45%, while China Unicom and China Telecom had 30% and 25%, respectively.

Figure: 3G Subscriber Market Share by Operator in China (as of Nov 2010) 

China Unicom's 3G service subscribers account for approximately 8% of its total mobile service user numbers, while for China Mobile the figure is approximately 3%; neither of these amounts are impressive by any standards. Compared with China Telecom's CDMA2000 and China Unicom's WCDMA network, China Mobile's TD-SCDMA network did not gain the upper hand in the 3G market. In order to address the limitations in its existing 3G TD-SCDMA services (such as handsets only addressing the domestic market, and the limitations of global roaming forcing operators to reinforce dual mode/multiple mode handset development), China Mobile has accelerated its TD-LTE development plans. 

China Mobile is driving most of the momentum behind TD-LTE in China. The operator is trying to gain support for TD-LTE outside the country so that it is not limited by lower equipment volumes. The company’s LTE plans are supported by the Chinese government, and it has recently been granted permission by the Ministry of Industry and Information Technology (MIIT) to test TD-LTE in 6 cities, including Shanghai, Hangzhou, Nanjing, Guangzhou, Shenzhen and Xiamen. Telecom giants such as Alcatel-Lucent, Ericsson, Huawei, and ZTE, have participated in technical trials of TD-LTE technology with China Mobile since the end of 2008.

China Mobile is planning to invest over RMB 1.5 billion (US$227.44 million) for the testing project. The investments in TD-LTE will reach the level China Mobile pumped into 3G – more than US$15 billion invested in TD-SCDMA network construction and 225K 3G base-stations as of the end of October 2010. The evolution path to TD-LTE does not negate China Mobile’s continued investment in 3G service. According to the company, many of the radio components, backhaul networks and cell sites can be shared; the technology is designed with evolution in mind.

The commercial phase of TD-LTE in China is expected to start as early as 2012, as the country has launched the tests of the technology in six major cities this year. According to China Mobile, 15 TD-LTE trial networks were already deployed worldwide as of December 2010, and another nine test networks, in cooperation with global telecom operators, will be added during 2011. 

The development of TD-LTE is moving swiftly, and will entail the world's two fastest growing markets (China and India) driving the momentum. But the appeal of TD-LTE has widened well beyond China and India. Taiwanese operator Far EasTone has revealed that it will jointly develop a next generation TD-LTE mobile network in Taiwan for testing purposes with China Mobile. Softbank Mobile in Japan is considering deployment of TD-LTE for its 4G network. The company could deploy TD-LTE in the 2.5 GHz spectrum to which it had gained access, when it bought a stake in failing PHS operator Willcom (Japan).

SK Telecom and China Mobile carried out their first joint TD-LTE field trial in August 2010 near Seoul and have now announced first results. The operators found that average download throughput, in a 10 MHz band, was 14.6Mbps, with uplink averaging 6.2 Mbps. Qualcomm and Asiaspace (Malaysian WiMAX license holder) have signed a non-binding MOU to explore future deployment of TD-LTE technology in Malaysia. 

Major European operators have typically deployed FDD networks, but recent trends indicate that operators are increasingly becoming interested in TDD bands. Huawei, for example, has been awarded a contract to deploy the TD-LTE network for Poland's Aero2. The network is expected to be operational in 2011 and could be the first commercial TD-LTE network worldwide.

The close working relationship between China Mobile and both patriot and offshore suppliers is structured to provide smooth transition of networks and economies of scale for TD-LTE deployments. The marriage gives Chinese suppliers a leading role in TD-LTE development, the flavor of 4G that we think will take a majority market share in coming years despite the obstacles of spectrum availability.

On the WiMAX side, ChinaTel has become the Chinese operator with the largest potential in to deploy a WiMAX network. Deployment is underway in Beijing, Shanghai and Shenzhen, and is also in progress in nine other cities including Qingdao, Guangzhou and Nanjing, but Maravedis remains cautious about the chances for the operator to deliver what it is claiming.

ChinaTel’s goal is to deploy approximately 1,000 BTS during Phase 1. It expects to reach 947,000 WiMAX subscribers in China by the end of 2011, and 4.37 million at the end of 2014.

ChinaTel is deploying WiMAX in China, but the company has indicated it can also move to LTE as a network overlay or a side-by-side addition to its WiMAX network, pending government approval. Moreover, with LTE on the forefront, ChinaTel’s WiMAX networks are being developed to transition to LTE or use dual-mode technologies, according to market demand.

TD-LTE offers WiMAX operators a great opportunity to join the large 3GPP ecosystem, and leverage benefits of highest economies of scale, roaming and network sharing. The shift from WiMAX to TD-LTE will be a slow process, thereby, making it important for the two technologies to co-exist with each other.

MARAVEDIS is a leading analyst firm focusing on 4G and broadband wireless technologies and markets.

Author: Basharat Ashai, Market Analyst, APAC & MEA