Tuesday, September 29, 2009

CDMA growth in China

The FT this morning has a profile of the innovative management of China Telecom, the CDMA carrier in the PRC.

From what the article says, the Ministry of Information Industry's grand reorg of the Chinese telecommunications services sector — reallocating mobile licenses and consolidating weak operations with strong ones — seems to be having the desired effect. Competition is intensifying and firms are investing heavily in rolling out 3G infrastructure, both depressing profits.

In the reorg, China Telecom inherited the 2G CDMA operations run by Great Wall (a People’s Liberation Army affiliate) that became part of China Unicom. CT has been rolling out EV-DO, but many assumed that with its US technology it would be at a disadvantage compared to China Unicom (with GSM/W-CDMA) and China Mobile (the dominant carrier, using China’s home-grown TD-SCDMA).

However, the FT says that China Telecom has the highest growth of the carriers, jumping from 28m to 44m subscribers. (By comparison, China Mobile has 500m). To quote FT:
Analysts say China Telecom has established itself as the best run of the three telecoms operators.

“They are much more of a pragmatic, commercial animal than the political animal of China Unicom,” says Duncan Clark, chairman of BDA, a telecoms consultancy in Beijing.
The article credits the company’s research lab (China Telecom Shanghai Research Institute), and a company-wide innovation initiative that encourages workers to be more innovative in developing and packaging mobile services. The company runs an annual internal innovation contest, while engineers are sent to the provinces to work with regional marketing reps to understand the market.

Obviously it will be a while before China Telecom threatens China Unicom (142 million subscribers), and it seems unlikely to directly challenge China Mobile. Still, Qualcomm (and the global cdma2000 ecosystem) are fortunate to have drawn such an innovative ally in the world’s largest mobile market.