China's shrinking Wi-Fi still 50% bigger than cellular

China’s belated entry into 4G is driving operators to start unwinding their massive WiFi deployments – almost certainly the world’s largest.

According to the MIIT, the three MNOs decommissioned 87,000 WiFi access points in the first nine months of the year. That leaves just under 6 million still in operation, which is still nearly 50% more than the number of cellular base stations. While WiFi is shrinking, they added another 680,000 2G, 3G or 4G base stations to take the total to 4.08 million.

The numbers underlines how 4G has reshaped the China market in the last 18 months, as well as its tortuous path to get here. 

The operators began ramping up their Wi-Fi offerings in 2011-2012 to meet the demand for data. Chinese consumers were buying smartphones in large number but unlike other advanced telecom markets didn't have 4G networks to deploy them on.

China Mobile embarked on what is doubtless the world’s largest and most ambitious WiFi deployment. Through what it called its ‘four-network coordination’ strategy encompassing GSM, TD-SCDMA, WiFi and LTE-TDD it planned to deploy 6 million APs in three years.

The enormous scale of the rollout highlights its problem with TD-SCDMA, the locally-backed 3G technology that the mobile giant was railroaded into adopting but which had little support from the global industry.

If the aim was to find a way of carrying data traffic, the plan was spectacularly successful. By 2013 more than 70% of China Mobile’s data traffic was carried over WiFi. Yet financially it was a disaster, contributing just 2.7% of the operator's total data revenue.

A commentary on local telecom website C114 said the WiFi rollouts had been plagued by poor user experience and the difficulty in integrating WiFi and cellular. It noted that some operators had concluded that the “nature of the mobile operator business just wasn’t suited to WiFi.”

Strategy Analytics senior analyst Guang Yang said: “They can’t find a way to monetize their WLAN system. When 4G is available, the WiFi offload is not necessary for China Mobile. China Mobile has put its focus on 4G.”

Alibaba, Tencent, Xiaomi and others have invested in commercial WiFi service providers to offer free service to their users, Yang adds. But he says it’s unlikely that state-owned China Mobile would share its infrastructure with private companies.

Instead, China Mobile is revamping its Wi-Fi operation to focus on government and enterprises, where it sees a business in offering tailored networks and services.

The Wi-Fi retrenchment points up the impact of 4G, which formally launched in China only early last year but has dominated growth since. In the first three quarters of 2015 China Mobile’s revenue has been higher than its two rivals combined, snaring snared 69% of net adds with 30% of its 823 million customers using 4G.