China Mobile commits $6.7B to TD-LTE capex in 2013
China Mobile disclosed that it will invest $6.7 billion in rolling out TD-LTE this year, potentially setting up the operator to finally get an Apple (NASDAQ:AAPL) iPhone that will work on its network.
The operator expects to end 2013 with more than 200,000 TD-LTE base stations in 13 cities, up from the 20,000 base stations it had deployed by the end of last year.
The move will have significant ramifications outside of China, helping give confidence to makers of network gear and devices that there will be a viable TD-LTE ecosystem in the years to come. "If you're Ericsson, Huawei, Softbank or Apple, it's sending a clear statement that they believe this technology will work and they're putting their money where their mouth is," said analyst Tucker Grinnan, who was quoted by the Wall Street Journal.
The $7 billion TD-LTE investment is part of a much larger $30 billion capex budget outlined by China Mobile for 2013. The operator spent only $19.7 billion on capex in 2012.
China Mobile Chairman Xi Guohua also urged China's government to issue licenses that would enable LTE networks to launch by year's end, saying it would be "appropriate" to do so. Chinese officials have indicated the Ministry of Industry and Information Technology will finally be ready to finally issue the licenses sometime this year. Though operators have been rolling out "trial" TD-LTE networks, none are officially licensed for commercial use.
China Mobile CEO Li Yue also said there has been "no progress" on negotiations between the operator and Apple to create an iPhone compatible with China Mobile's existing TD-SCDMA 3G network. Some 10 million of China Mobile's customers reportedly own an iPhone even though the device does not work properly on the operator's network.
Having a commercial TD-LTE network in place could change everything for China Mobile.
"Apple's iPhones will be like a killer app for China Mobile once it gets its 4G up and running," said Huang Leping, an analyst at Nomura International in Hong Kong, in a Reuters article. "That will definitely boost user numbers, though it will weigh on the bottom-line in the first year or so as China Mobile will most probably have to provide heavy handset subsidies for the iPhone."
China Mobile said its 2012 profit grew 2.7 percent to $20.8 billion, almost half the growth rate of the 5.2 percent the operator saw in 2011. However, its 2012 revenue rose 6.1 percent to $72 billion. China Mobile is the world's largest mobile operator with 710 million subscribers.
In January 2012, U.S. WiMAX Clearwire (NASDAQ:CLWR) and China Mobile announced plans to conduct joint interoperability testing for TDD-LTE networks to accelerate the deployment of TDD-LTE devices. The agreement built upon a partnership Clearwire and China Mobile inked in September 2010 to accelerate the TDD-LTE ecosystem.
Clearwire CEO Erik Prusch said last month that the operator remains on track to turn on 2,000 TD-LTE sites by the end of June and 5,000 by the end of 2013. Clearwire CFO Hope Cochran said the company is budgeting $600 million to launch 8,000 TD-LTE sites, and $200 million to $250 million of that will come from vendor financing agreements.
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