China Mobile set to slash LTE pricing, increase network spend

Increased competition appears to be hitting the Chinese mobile market, with reports that the country’s largest operators – and some of the largest in the world – are set to slash rate plans in order to maintain their tremendous growth.
The Wall Street Journal reported this week that China Mobile, which counts more than 780 million wireless customers, was set next month to cut pricing on its recently launched LTE service by up to 50%. The pricing moves are reportedly coming in an attempt to spur slugging uptake of LTE services and to fend off competitive pressure from fellow state-run operators China Unicom and China Telecom. The Chinese government earlier this month announced it would allow wireless carriers to be more aggressive on rate plans.
China Mobile recently announced it had added nearly 4.8 million customers to its LTE network since launching services late last year. However, overall growth was slowing year-over-year mainly due to the loss of 2G customers.
While competition across Chinese carriers is set to increase, the operators are still closely aligned having recently acknowledged they were in negotiations for form a “base station company” that would “enhance the sharing of resources for the development of telecommunications infrastructure and lower operating costs and the costs for developing telecommunications networks,” according to China Mobile.
While details of the negotiations were not released, it’s believed that the three operators are looking at ways to share LTE infrastructure across mobile sites. A Chinese publication, Caijing, explained that the joint venture would be capitalized by the three operators, would initially look to install new base stations and then lease capacity to the three operators, and finally would acquire current sites owned by the three operators.
Network expansion
As part of its efforts, China Mobile also said it plans to increase investments into its network. That looks to include a new round of contracts to expand the reach of LTE services as the carrier has reportedly handed out a second round of agreements, with Reuters reporting a majority of those deals went to local telecom equipment providers Huawei and ZTE.
The report, citing people familiar with the deals, claims those two vendors garnered 65% of the latest round of spending, with Ericsson and Alcatel-Lucent each picking up 9% of the plans and Nokia garnering 8%. China Mobile said it was looking to build 500,000 base stations across the country this year.
China Mobile last year handed out an initial $3 billion in contracts in connection with its LTE plans. Those initial deals included a combined 50% of the value going to Huawei and ZTE, with the other three vendors each picking up approximately 10% each.
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