China swaps out 'scum' telco bosses

Beijing has just swapped around its telco chiefs. Two have done a direct swap and the third has retired, replaced by a government official to take over the third operator.

As China’s economic management comes under global scrutiny, it’s a neat illustration of how it sees the game differently from the rest of the world.

Under the changes, Chang Xiaobing is the now chairman and party secretary at China Telecom, positions he previously held at China Unicom. Former China Telecom chief Wang Xiaochu replaces him at Unicom.

Over at China Mobile, the new man is Shang Bing, previously a vice-minister at MIIT. He replicates the path followed by retiring Xi Guohua, who moved to the operator from the MIIT in 2011, taking over as chairman in 2012.

The appointments were revealed in a series of announcements on Monday morning by the CCP Organisation Department – another key point: leadership posts in large and politically-sensitive SOEs are all CCP positions.

This isn't the first time the party has simultaneously rung the changes among the telco top tier. In 2004 it carried out a similar reshuffle in which, Unicom chairman Wang Jianzhou became China Mobile president, Shang Bing was promoted to Unicom president and China Telecom vice-president Chang Xiaobing became CU chairman and party secretary.

And why?

As a commentary in Sina Tech says, many analysts at that time thought the reshuffle would allow the chiefs to see the world through each other’s eyes and “avoid excessive competition.” Clearly the party bosses think it's been a success.

Punters think differently, however. The most popular comment under the most popular Sina story – focusing on China Mobile – declares: “You scum. All your packages are a fraud.”

The changes come on the heels of mediocre interim results. For all its dominance in 4G, China Mobile  earnings fell by nearly 1% and revenue rose just 4.9%. China Telecom’s net shrank 4% and only China Unicom showed improvement, with a 4.5% hike in income. No one is suggesting the leadership changes are intended to address any of the issues facing the three.

Final point: none of the new execs is female. All of the nine new appointees at China Mobile are male.

When China Mobile met Steve Jobs

It took six years for China Mobile to strike a deal with Apple over the iPhone. In all that time China Mobile’s then-boss Wang Jianzhou met with Steve Jobs just once.

Click to read more ...

China Mobile abandons its $3b Wi-Fi network

Another consequence of China's tortuous path to 4G: China Mobile has all but abandoned its massive Wi-Fi hotspot network, while China Telecom plans to build one of its own.

China Mobile has found that its network of 4.3m hotspots, presumably the world’s largest, and deployed at a cost of 17bn yuan ($2.75b), is uneconomic.

Wireless data revenue across all of China Mobile’s networks last year rose 59%. But Wi-Fi data occupied an unsustainable 74% of all traffic, and generated a microscopic 2.6% of revenue.

The operator returned just 15 yuan per month from each Wi-Fi user - “not even enough for network optimisation, let alone ROI,” a Henan Mobile official in charge of Wi-Fi told Sohu IT.

The result is that China Mobile has cancelled further Wi-Fi construction and has cut back on optimisation and maintenance.

This comes as no surprise, given China Mobile’s well-documented difficulties with TD-SCDMA.  In fact it was the poor data performance of the local 3G technology that drove China Mobile into Wi-Fi in the first place.

But low-priced, widely-deployed Wi-Fi is also an attractive alternative to 4G, as early figures from China Mobile's 4G campaign suggest. To the end of April it had sold 14m TD-LTE handsets but fewer than 4m of these had upgraded to 4G.

Sohu IT also points to an unhealthy skewing of the Wi-Fi rollout to a handful of provinces. For some reason, China Mobile’s Shandong unit has installed more than 1m hotspots, Shanxi 560,000 and Henan 400,000 - three provinces with less than a fifth the population accounting for 46% of the installed base.

In light of the poor returns from Wi-Fi, China Mobile is going all-out for TD-LTE and has forecast it will have rolled out 500,000 base stations in 300 cities by year-end.

Yet while 4G has driven China Mobile out of Wi-Fi, it is an accelerant for China Telecom. Chairman Wang Xiaochu said in an interview last month that he is planning to step up Wi-Fi investment.

That’s because the operator is being held back from deploying its preferred brand of 4G, FDD, while its cdma EVDO network is no match for either LTE or China Unicom’s HSPA services.

China Telecom has been issued with a ‘trial’ FDD licence, but for just 16 cities – a long way short of the 300 it’s hoping to reach nationwide. In that light, Wi-Fi makes some sense, yet it's hard to see how China Telecom can avoid the same problems besetting China Mobile once its FDD network gets up to speed.

The best solution would be for a third party to take China Mobile's Wi-Fi network off its hands and wholesale it to the big three or any of the new MVNOs. Ranking 96th in world global broadband speed rankings, you'd think China couldn't afford to allow infrastructure to go to waste. In fact, duplication and waste appear to be the order of the day.

Finally, China Mobile chooses MVNO partners

China Mobile, the latecomer to the MVNO party says it has chosen 17 MVNO partners and is awaiting approval from the MIIT.  After that it hopes to sign agreements with the MVNOs, China’s National Business Daily reports.

China Mobile is months behind rivals China Telecom and China Unicom, whose MVNO partners were issued licences in December. Both Telecom and Unicom say they expect trials to start in Q2, according to the NBD.

China Mobile won’t reveal the names of its MVNO partners, but one small Shanghai-listed telco, Dr Peng Group, said it had applied and was waiting for a response.

A China Mobile spokesperson told the NBD in an email: “We are very willing to cooperate with MVNOs, to launch richer business and services and to satisfy customer demand for personalised and differentiated apps.”

China Mobile faces $2b bill over interconnect change: report

The MIIT is considering cutting the mobile interconnection fees for China's two smaller cellcos, China Telecom and China Unicom.

A ministry research report has recommended halving the fee Telecom and Unicom pay China Mobile because its dominance has “unbalanced” the market, ENN Weekly reports (in Chinese).

In return, the ban on China Mobile to entering fixed-line broadband should be lifted, the study suggests. China Mobile’s role in the market has been unclear since the prohibition formally ended in Dec. 2011.

Currently the three operators pay 6 fen (just under 1c) a minute to each other to deliver calls. MIIT recommends cutting that to 3 fen (still using calling party pays system).

ENN Weekly estimates that under the plan China Mobile’s mobile interconnection payments will increase by more than 12b yuan ($1.96b) a year.

The timing is interesting. Last financial year, China Mobile’s profit towered over its rivals, as it has every year for the past decade, posting 129b yuan in earnings, more than eight times the combined profit of the other two.  Yet it increased income by just 2.5% in the second quarter and is on track to post its first full-year decline in 14 years.

By contrast, thanks to the faster speed and quality of their networks, and the availability of the iPhone, China Telecom and China Unicom are in the mobile data sweet spot, knocking up profit gains of 21% and 41% respectively.

Next year the market will take a fresh turn when 4G comes to town. China Mobile has been the most aggressive in its rollout.

China Mobile’s stock price fell $1.46 to $55.14 in the wake of this news breaking last Thursday.

The ministry will hold hearing on the issue before it makes a decision.