Waiting for the family to wake up and feed me
It’s hard to tell from the story, but it appears that Mr. Cui is assuming that it will cost all of the carriers the same amount of money to roll out nationwide networks. He seems to have missed an important point.
While certainly China Telecom and China Netcom will have to start from scratch and shell out up to $ billion each to get their networks up and running, and China Mobile will have to cough up a good percentage of that because of minimal network redundancy with GSM, China Unicom will not be quite so fiscally challenged.
China Unicom currently operates a nationwide CDMA network based on CDMA X-RTT. As any Korean mobile phone carrier will tell you, upgrading that to a G-level network based on CDMA X-EV-DO will allow Unicom to retain the vast majority of its equipment in place, AND will leave the new network able to service all current subscribers because of the backward compatibility of the network.
(Point of fact, Unicom has been upgrading its network slowly anyway – or at least, that’s the buzz. By the time licenses are granted, Unicom will be approaching a fait accompli.)
In essence, not only will Unicom’s costs to operate a G network be a tiny fraction of that of its competitors, it will have significant operating advantages going forward because it will not have to operate two networks in parallel.
All of this assumes, of course, that the MII doesn’t order Unicom to scrap its CDMA network in favor of TD-SCDMA, but the thinking appears to be to let Unicom stick with the technology it has.
It also appears that Mr. Cui has neglected to mention a couple of other costs that will need to be considered, to wit:
. Neither China Telecom nor China Netcom have established retail presence to sell their service and to drive subscriber growth. These will be immensely expensive and time-consuming projects and need to be factored into any cost calculation.
. China Unicom remains the weak sister in Chines telecommunications for so many reasons they would consume a book. When considering the coming competitive challenge of G, however, Unicom’s most glaring issue is its failure to create a strong marketing organization. Privately, even China Mobile people will confide that China Unicom has long held a technology advantage over China Mobile. CHU’s failure to exploit that in the marketplace may well go down as the greatest lost opportunity in the history of Chinese telecommunications.
IF that is going to change, Unicom is going to have to make a huge investment in turning its reputation around, lest it be a weak last-place player in the market and eventually find itself turned into carrion.
. China Mobile is going to get stuck running two separate networks for a very long time. One can only hope they do a better job at it than Unicom, which itself is saddled with two parallel networks. Until they can get all of their users upgraded to 3G – which won’t happen until there are very low-cost phones available several years from now – this is going to mean constant investments in parallel services, networks, phones, and the like.
. I would also have thought Analysys would have pointed out a likely significant cost differential per user between TD-SCDMA networks and WCDMA networks. A signal from a TD-SCDMA base station doesn’t reach anywhere near as far as one from a WCDMA or X-EV-DO base station. This likely will mean that any carrier saddled with a TD-SCDMA license will have higher build-out costs to ensure consistent quality of service for the same number of subscribers in the same sized geography. Not also that this does not take into account any price differential between WCDMA (with its wider acceptance, initially better economies of scale, and greater competition among suppliers) and TD-SCDMA, which is basically starting from scratch.
Perhaps these issues are covered in the report, but if they are I’m surprised they haven’t made it into Analysys’ top-line thinking.