China 4G License Expected This Year

As per media reports, People’s Republic of China – the biggest telecom market in the world by subscriber base, is expected to issue fourth generation (4G) license before the end of this year. A country wide 4G network will allow the Chinese people to get 5 times faster internet speed than 3G.

China has been lagging behind competing economic counterparts, especially USA, Europe and Japan in LTE (Long Term Evolution) deployment. USA has been the leader in LTE deployment, where almost every operator is expanding their LTE network. Japan and various developed countries in Europe are not lagging far behind, where most of the operators have started rolling out LTE networks.

This news comes on the back of a recent report from research firm IHS iSuppli, which predicts that 4G LTE will propel the next phase of growth in the Chinese telecom space. According to iSuppli, 4G customer bases will surge from an expected 1 million in 2013 to 439.9 million in 2017 with China Mobile Limited (CHL - Snapshot Report) boasting of the biggest share of 52%, followed by ChinaUnicom Limited (CHU - Analyst Report) with 26% and China Telecom Corp. (CHA - Snapshot Report) with the remaining 22%.

The 3G technology in China hasn’t received meaningful success yet. Till Jan 2013 only 247.2 million of its total 1.12 billion subscribers had 3G connections. Among the three carriers, China Mobile has the lowest 3G connections in China. Its home grown Time Division-Synchronous Code Division Multiple Access (TD-SCDMA) technology is partly responsible for the poor show, which is not very well supported by the handset makers including Apple Inc.’s (AAPL - Analyst Report) iPhone.

Chine Mobile, the world’s largest carrier by subscriber base, has already started to deploy TD (Time Division) LTE 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 the year.

Within Asia pacific, South Korea has seen the greatest acceptability of LTE services because it has been able to back the latest technology with innovative smartphones that supports LTE. At the end of 2012, South Korea’s largest carrier S K Telecom Co Ltd’s total number of LTE subscribers exceeded 7 million, making up 26% of its total mobile subscriber base. The company expects that 60% of its total customer base will have LTE connections by the end of 2013.

We believe China’s LTE success will depend on the country’s ability to develop smartphones that support the super fast technology and the required investment in network infrastructure.