Communication breakdown

Mobile warfare rages as battle for 3G dominance heats up

Communication breakdown

Works everywhere but Wenzhou

Mainland business leaders are firm believers in the adage “the marketplace is a battlefield”. And when it comes to winning the battle, there’s no place for sportsmanship.

Look no further than China’s telecom sector, where China Mobile employees were recently accused of sabotage in Wenzhou.

Four employees were caught dialling into China Telecom’s network with more than 200 mobile phones at the same time, according to the China Daily.

“They were deliberating interrupting our signal. This is not the only time they have sought to interfere with our signal in densely populated areas,” says Xu Weijie, director of the local office of China Telecom in Wenzhou.

But China Mobile denied any wrongdoing. One of the employees, surnamed Dai, claimed nothing illegal had occurred and that his team was only “testing their network.”

Experts say such a test would be better conducted at night with three or four phones at most. Using so many phones concurrently was likely to congest the network and even paralyse it.

It is not the first case of bad blood between Chinese carriers. China Telecom employees have been caught trashing China Unicom equipment, reports the Shanghai Daily, while rival teams are reported to have come to blows on several occasions.

The tension is an upshot of the fierce competition to emerge as top dog in the country’s nascent 3G market.

China Mobile, long the market leader (and world’s largest telecom provider), is starting to feel the heat, in particular from China Telecom.

Exhibit one: it reported a 58% share of new subscribers in the third quarter against 78% at the start of the year. That’s a steep drop.

However, the slippage is understandable. By government fiat, China Mobile was given a licence to operate a network using the locally developed (and untested) TD-SCDMA technology.

China Telecom and China Unicom, its two smaller rivals, were granted licenses for more established international 3G standards, CDMA-2000 and WCDMA.

The untested standard is proving to be just the handicap that most predicted.

In a recent filing with financial regulators, China Mobile admitted that “we have encountered and may continue to encounter challenges in the deployment of our 3G services,” and that “we may not be able to effectively and economically deliver our 3G services based on this technology.”

Competitors smell blood. China Unicom recently announced that its 3G fee plan will start from Rmb96, almost half the price of the trial package it started offering in May.

Meanwhile, China Telecom – the country’s biggest fixed-line carrier – has launched a service that enables customers to call certain phone numbers for free and receive calls for free. It is also trying to lure subscribers by releasing a slew of cheaply produced 3G handsets to be priced in the $70-$140 range.

China Mobile’s third quarter results gave investors less to be excited about, and its stock is the worst performing of three telecom operators. Its shares have advanced 1.2% this year, while shares of Telecom climbed 32%, and Unicom 19%.

Still, it is responding with stepped-up efforts to keep its high-end customers (who contribute 40% of revenue) by lowering international roaming fees by up to 80%. It is also looking at new areas, such as e-books (see article on page 10).

Meanwhile, back in Wenzhou the recriminations continue.

Dozens of China Telecom customers are now complaining that they were unable to get through to China Mobile customers.

A China Telecom subscriber told the Shanghai Daily that something must be wrong with the operator’s signal tower because he could reach all numbers except the China Mobile ones…

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.