China Issues 4G Mobile Licenses; TD-LTE Market Experiences Breakthrough
Published on: 16th Dec 2013
Research firm IDC says that it expects that China's recent issuance of its 4G licenses will bring about far reaching influence on the development of both China's and the global mobile Internet market.
On December 4, 2013, the Ministry of Industry and Information Technology (MIIT) of PRC issued the "LTE/ the fourth generation digital cellular mobile telecommunications service (TD-LTE)" business license to the country's three mobile networks.
In November 2013, MIIT had specified TDD frequency spectrum planning, of which, China Mobile obtained 130MHz, (1880-1900 MHz, 2320-2370 MHz and 2575-2635 MHz); China Unicom obtained 40MHz (2300-2320 MHz and 2555-2575 MHz); China Telecom obtained 40MHz (2370-2390 MHz and 2635-2655 MHz). Completion of spectrum allocation and formal issuance of the 4G license formally marked China 4G service's move to the first year of commercial application.
"As the three major telecom operators of China obtained the TD-LTE licenses, the strength of the TD-LTE camp will be greatly enhanced, and the industry will be more mature," says Jason Shen, Senior Analyst of Telecommunication Research, IDC China.
IDC predicts that during 2013-2017, the GAGR (Gross Annual Growth Rate) of the global shipments of TD-LTE mobile phones will reach 103%. And by 2017, the shipments of the TD-LTE mobile phones will account for nearly 1/4 of those of the 4G mobile phones.
"Meanwhile, the development of China's TD-LTE terminal market will be faster; and the shipments of China's TD-LTE mobile phones will exceed 180 million by 2017, accounting for 46.6% of those of the 4G mobile phones. The three major telecom operators take the 4G service as the focus for next-step investment and development, which will have an effect on the development of the broadband market to a certain degree," explains Shen.
IDC believes that the influence of the formal commercial application of China's 4G service on the communication market is mainly reflected in the following five aspects:
(1) The TD-LTE industry maturity will accelerate. By October 17, 2013, the number of global commercial LTE networks had reached 222, of which, 23 are TD-LTE, accounting for only 10% of that of the global commercial LTE networks.
In addition, 11 networks of the 23 TD-LTE networks adopted the hybrid networking model. Globally, the development process of the TD-LTE industry lags far behind that of the LTE-FDD.
Now, with the formal issuance of China's 4G license, the three Chinese telecom operators have formally joined the TD-LTE camp, which will bring about greater confidence to the industry and promote accelerated development of the TD-LTE industry in China and globally.
IDC expects that the TD-LTE industry will experience rapid development in terms of both network coverage and the number of subscribers, and therefore rapidly narrow the gap with LTE-FDD.
(2) The TD-LTE device market will grow to an important one from a niche one. Subjected to small network coverage, less service operators' commitment, and high device price, the TD-LTE device market, particularly the TD-LTE mobile phone market, has been developing slowly in recent years.
According to IDC, in the first three quarters of 2013, the shipments of global TD-LTE mobile phones accounted for only 1% of those of 4G mobile phones. As China formally released the TD-LTE service, IDC expects the development process of the global TD-LTE device market to accelerate.
IDC predicts that the shipments of global TD-LTE mobile phones in 2017 will exceed 220 million and the GAGR during 2013-2017 will be 103%. In line with that, the share of the shipments of TD-LTE mobile phones in those of 4G mobile phones is expected to substantially increase to 23%. With the surge of the shipments, the price of TD-LTE mobile phones will decrease. IDC predicts that the average price of TD-LTE mobile phones in 2017 will be 37.2% of that of TD-LTE mobile phones in 2013.
As one of the most important global TD-LTE markets, China's TD-LTE device market benefits from the formal issuance of the 4G licenses and is expected to grow rapidly. IDC predicts that the shipments of China's TD-LTE mobile phones in 2017 will exceed 180 million and the CAGR during 2013-2017 will be 230%. TD-LTE mobile phones will become an important component of China's 4G mobile phone market, and the shipment of TD-LTE mobile phones is expected to be 46.6%. At the same time, with increasing maturity of the industry, device manufacturers will release more economical mobile phones, thus decreasing the average price of TD-LTE mobile phones. IDC predicts that the average price of China's TD-LTE mobile phones in 2015 will be less than RMB 1500.
However, for China's market, 4G is still new and at the initial stage of the commercial application, lack of TD-LTE devices will be a bottleneck for the development of 4G network in a long term.
In addition, as the 4G network needs to coexist with 2G and 3G networks for a period of time, there will be a need for chips to support different modes and frequency bands. As a consequence, the terminal design will meet great challenges, and vendors are faced with higher demands than 2G and 3G terminals.
(3) The balanced competitive situation at 3G era will be broken once again. Limited by technological issues, the development speed of China Mobile's 3G service is lower than that of the 2G era, providing an opportunity for the other two operators to catch up.
According to the 3G user data released by the three telecom operators, the gap has narrowed, and certain equilibrium has formed. However, with the formal commercial application of the 4G network, the balance will be broken once again.
According to the latest development planning of the 4G service of the three operators, China Mobile is the most aggressive one. As early as January 2013, China Mobile launched an invitation of tender with more than RMB 20 billion for core 4G network equipments.
By November 2013, China Mobile had built TD-LTE trial networks in more than 100 cities all over China, and it is predicted that more than 200,000 4G base stations will be deployed before the end of 2013. At the same time, its procurement of TD-LTE devices is also the greatest. It plans to ship 50 million TD-LTE devices in 2014, of which, 40 million are TD-LTE mobile phones.
Seen from the development experience of American markets, as with the experience of Verizon in the US market where it gained the competitive edge on the 4G market by rapid network coverage and assorted device strategies, and the number of its 4G subscribers keeps bigger than that of the other operators. So far, the number of 4G subscribers of Verizon has still been the biggest among the major telecom operators of America. Therefore, IDC is also optimistic about the development prospect of China telecom operators who have first mover advantages in the development of the 4G service.
(4) The high bandwidth mobile application development will be effectively pushed forward. As the foundation of the mobile Internet, mobile networks play a crucial role in the development of the entire market. Thus, China's high bandwidth mobile application market has been developing slowly, limited by the mobile bandwidth. However, with the formal commercial application of the 4G service, the download rate of 100Mbps will be provided for users, effectively breaking the bandwidth limitation and laying a foundation for the development of China's high bandwidth mobile application market. IDC is optimistic about the development prospect of high bandwidth mobile applications such as mobile videos, mobile music and mobile online games.
(5) Certain negative impact on the development course of "Broadband China". According to the planning of MIIT, the executive bodies of "Broadband China" are the three major telecom operators, with China Telecom and China Unicom undertaking most of the tasks. With the formal commercial application of the 4G service, China Telecom and China Unicom have adjusted their core services and taken the 4G service as new key focus of investment and development. This will affect the investment and operation of the broadband service and have certain effects on the entire development process of "Broadband China".