China Mobile to triple handset subsidies: report

A price war looms in China’s emerging 3G market, with China Mobile reportedly planning to increase its handset subsidies nearly threefold next year to more than 30 billion yuan (€2.94 billion).

Competition in China has stepped up this year following an industry reshuffle a year ago that brought China Telecom into the mobile market with Unicom’s CDMA network.

All three carriers have commercially launched their 3G networks over recent months, but take-up has been slow, with market leader Mobile hamstrung by the limited number of handsets for the new TD-SCDMA system.

But now with its device range expanding and the network expected to be rolled out to 238 cities by year-end, the market’s 800-pound gorilla appears ready to assert itself.

Analyst firm BDA says China Mobile plans to spend 120 billion yuan on handset subsidies this year, most of it on TD-SCDMA. It laid out 50 billion on subsidizing phones in the first half of the year, with less than 12% going to TD phones.

A China Mobile source told has told website C114 that the company would leverage its financial strengths “to stage a price war to resist Telecom’s and Unicom’s 3G” services.

China Mobile has 503 million users, Unicom 142 million and China Telecom 44 million customers. Of these 3G comprises a tiny fraction - China Mobile has 1.3 million using TD-SCDMA, Unicom 350,000 using W-CDMA and China Telecom 1.3 million on its CDMA EV-DO network.

A China Unicom source said Mobile was being too hasty in planning a subsidy war, saying his company has already been hurt by its subsidized prices.