Construction of TD-LTE networks in China has accelerated as China Mobile prepares its largest base station procurement for 2013. The company plans to acquire approximately 200,000 TD-LTE base transceiver stations (BTS), with equipment vendors expected to submit bids by June. If the rollout proceeds on schedule, LTE will be deployed across more than 340 cities, with a priority on roughly 100 major markets where demand for mobile broadband is strongest.
China Mobile aims for TD-LTE coverage reaching as many as 300 million people. Simultaneously, the operator plans to deploy 110,000 new TD-SCDMA BTSs to support ongoing 3G traffic growth and provide an easier upgrade path to TD-LTE in the future, since TD-SCDMA and TD-LTE share similar transmission principles.
The procurement is estimated at RMB 20 billion (about US$3.2 billion), representing nearly half of China Mobile’s LTE construction budget for 2013. Actual spending will depend on bidder quotes, price negotiations and installation costs. It is not yet clear whether the RMB 20 billion estimate will be fixed within the tender or supplemented later, a common practice in China. Regardless, China Mobile is set to be the year’s largest LTE spender, while rivals China Unicom and China Telecom remain more cautious.
Up to eight vendors are expected to participate in the tender, including Huawei, ZTE, Datang Mobile, Potevio, FiberHome, Ericsson, Nokia-Siemens and Shanghai Bell (owned by Alcatel-Lucent). Domestic suppliers may capture a significant share because of close operator relationships and competitive pricing, but international technology leaders such as Ericsson are also well positioned to increase LTE sales given their expertise in the standard.
TD-LTE’s prospects for China Mobile are still uncertain, but it offers a potential turnaround from the troubled TD-SCDMA era. TD-LTE benefits from broad vendor and chipset support, proven deployments in multiple countries, and extensive China Mobile testing across a dozen cities that reported no major technical issues. Even with strong funding and determination, it will take time to determine whether TD-LTE can reverse the financial strain caused by TD-SCDMA-related setbacks.
Spectrum allocation is another variable that will influence pricing and delivery schedules. Tests have used three bands: 1900 MHz (Band F), 2300 MHz (Band E) and 2600 MHz (Band D). Band F is primarily used where TD-SCDMA BTSs are co-located with LTE sites. Band D, intended for new LTE sites, and Band E, used for indoor coverage, were also part of testing. At present Band F is occupied by a legacy quasi-mobile service with limited nationwide bandwidth but broader coverage potential; it also allows TD-SCDMA/LTE co-location with minimal hardware changes and largely software upgrades. For Band D the government has allocated about 190 MHz for TD-LTE (2500–2690 MHz), a sizable block suitable for national deployment and aligned with international norms and standardized equipment.
License
Licensing remains a key uncertainty for LTE rollouts. The Ministry of Industry and Information Technology (MIIT) has not disclosed timing or the number of licenses to be issued, but industry observers generally expect LTE licenses within a few months. To avoid conflicts of interest and political criticism, regulators could issue flexible “blank check” licenses without preconditions such as mandating TDD or FDD, allowing operators to choose their preferred mode.
For China Mobile, an official LTE license is long overdue. Since 2012 the operator has been building LTE networks in over a dozen cities and has deployed roughly 20,000 BTSs for testing and early services. Trial services have been launched in cities such as Hangzhou, Shenzhen and Guangzhou, where volunteers access LTE via dongles or LTE-WiFi gateways for Wi‑Fi-capable handsets. Average downlink speeds in trials reached 40–50 Mbps—about ten times faster than typical 3G speeds—but trials have been limited by the shortage of compatible LTE handsets.
Late last year China Mobile ordered 77,000 trial devices to be delivered by summer, most of which are dongles and modems rather than handsets. The operator plans to procure 1.2 million LTE terminals in 2013, though only a fraction are expected to be handsets initially. An initial batch of roughly 160,000 units is planned, with larger volume shipments anticipated in the third quarter.
Delays in LTE handset availability could hinder consumer uptake, mainly because chipset supply constrains handset manufacturing. China Mobile requires LTE handsets to be backward-compatible with TD-SCDMA and GSM, limiting the pool of capable chipset and handset makers to a few—most notably Qualcomm, MediaTek, and Spreadtrum, with Marvell to a lesser extent. Scaling up volume production will take time. Price is another factor: if LTE smartphones are priced significantly higher than existing 3G models, many consumers will opt to remain on 3G. Today, decent 3G smartphones with quad-core processors and 4.5-inch 720p displays can be found for about RMB 1,200 (roughly US$190) or less.
Even with handset supply improving, TD-LTE faces competitive pressure. China Unicom is still weighing its LTE strategy—between FDD and TDD—and its 2013 capex for LTE is reportedly in the RMB 5–10 billion range. Meanwhile, Unicom can continue to attract customers with HSPA+, which offers up to 21 Mbps across existing WCDMA coverage, plus reliable service and lower prices. Nevertheless, the issuance of LTE licenses is likely to intensify competition, forcing operators to roll out LTE or risk losing high-value customers who generate the most data traffic and contribute higher average revenue per user (ARPU). Although China Mobile appears to have an early advantage, the market outcome is still uncertain as operators, vendors and regulators navigate spectrum, devices and licensing decisions.