4G contracts: China Mobile throws EU firms a bigger bone

Huawei and ZTE have once again won the biggest share of a major Chinese telecom tender, despite being undercut by Nokia Siemens.

In what is certain to be the largest telecom tender this year, China Mobile handed out 20 billion yuan ($3.27b) in contracts to build its TD-LTE network in 100 cities.

Nokia Siemens surprised the industry when it was revealed during the tender that it had bid the lowest price - the first time a foreign vendor had done so. Despite that, it won no more business than other foreign players, and much less than the two large local firms.

With what appears to be immaculate stage management, Huawei and ZTE emerged with 26% each of the total tender, while the three foreign vendors, Ericsson, Nokia Siemens and Alcatel Shanghai Bell, were allocated 11% apiece. Small Chinese players Datang, Potevio, New Postcom and Fiberhome picked up the remainder.

Chinese telecom news site C114 noted that the 67% share won by local firms was down slightly from their 70% share of China Mobile's trial network last year.

The market share number is more than academic. EU Trade Commissioner Karel De Gucht has warned he would push ahead with his subsidies case against Huawei and ZTE if European firms did not win a fair share of Chinese domestic contracts.

Chinese firms have a 25% share of the EU market, according to CICC telecom analyst Chen Haofei. The 33% of these contracts that have gone to European firms are probably enough to stave off De Gucht's attentions.

As well as the size - 207,000 base stations - this contract is strategically important as the first large-scale tender for the China Mobile's 4G network. The major winners are best-placed to pick up follow-up contracts as the network expands over the next decade or so.

EU curveball to test China market fairness

The European Union has thrown China a massive curveball.

EU Trade Commissioner Karel De Gucht is willing to drop his case against Chinese telecom subsidies if European firms win a big share of China Mobile's 4G tender, FT.com reports.

China Mobile’s tender for a 100-city TD-LTE rollout is the telecom industry’s biggest contract this year.

But Nokia Siemens surprised everyone by becoming the first non-Chinese vendor ever to undercut local players. It pitched a price of 33,000 yuan ($5,460) per carrier, compared with 35,000 yuan offered by both Huawei and ZTE.

Huawei and ZTE last year won the lion’s share of China Mobile’s 4G trial contracts, infuriating NSN and other foreign vendors.  Under China’s tender rules China Mobile is bound to award the biggest portion of the business to the lowest bidder.

The operator now has another reason to make sure that NSN gets the biggest piece of the pie.

Yet, as local website Sina Tech observed, this flies in the face of China’s practice of using fat domestic tenders to nurture the local industry:

“But for many years tenders by Chinese operators have tilted towards domestic suppliers, with Huawei and ZTE accounting for the lion’s share, [making it] impossible for foreign vendors to dominate.”

The FT story, published late Monday, has not been picked up by  China's usualy lively tech press, who will have been instructed to wait for the official Xinhua version. The tone of that statement, when it appears in the next 24 hours or so, may tell us a lot about China’s response.

It may report the story straight. Or, emboldened by their decisive win in the solar panel dumping case, Chinese officials may press home the advantage and complain strongly about EU blackmail.

Chinese operators get into bed with WeChat

Chinese operators – well, two of them anyway – have bowed to the inevitable and are striking deals with popular messaging service WeChat.

The pathbreaker is China Unicom, which is to announce a partnership in Guangzhou this afternoon.

China Telecom is also said to be prepping a service which would give users 2GB of WeChat and Sina weibo data for just 6 yuan (0.98) a month.

Both partnerships will take place in Guangdong, the wealthy southern province, and have a flavour of ‘suck it and see’ as operators test out the cooperative approach to dealing with OTT.

Missing from the party is China Mobile, which early this year skirmished with Tencent, the company behind WeChat, complaining the service was using up valuable network resources.

Rumours swirled that WeChat would be forced to charge its 300m users but, as this blog pointed out at the time, it was only China Mobile that had a problem, thanks to its under-powered 3G network. Plus it was unlikely that a newly-installed government would make itself so gratuitously unpopular.

The washup of that imbroglio is that the two smaller operators have gone over to the ‘enemy’ while China Mobile is on its own.  

According to Sohu IT, China Unicom is offering WeChat Wo for WeChat data at 15 yuan a month for those already with a minimum 36-yuan monthly package. (Wo is Unicom’s mobile data service.)

WeChat Wo will come with HD photos and HD movies, some free games, and the ability to support Unicom’s Wo payment feature. If all goes well in Guangdong, Unicom is hoping for quick expansion into other southern provinces such as Jiangsu, Zhejiang and Fujian.

For the operator, this is an important ‘ice-breaker’ in forging cooperation with OTT players, a Unicom source told Sohu IT. For Tencent, it is a chance to grow the business with a strong partner with a deep channel. Tencent chief Pony Ma reportedly played a direct role in the negotiations.

Such OTT partnerships are new to mainland China, but they’ve been in the Hong Kong market since last year. Hutchison launched a WhatsApp bundle last September, while PCCW has been selling a WeChat package since February.

Meanwhile, China Mobile is trying to go it alone with messaging app Fetion and Skype-like voice application Jego. Embarrassingly it had to pull Jego from the domestic market just after launch because mobile VoIP is still illegal in China.

Yet this won't trouble China Mobile. It's still working the old playbook, focusing on networks, not apps. At year-end, while Telecom and Unicom are planning their LTE networks, it will be racking up 4G subs.

Chinese cellcos shape up for $49b 4G rollout: report

In the wake of the government decision to accelerate 4G licensing, Chinese operators have begun positioning themselves for a network rollout battle worth as much as 300 billion yuan ($49bn).

China Telecom is to launch its first 4G trial next month, while both Telecom and rival Unicom are reported to be planning to start network construction by year-end.

China’s State Council declared ten days ago that it aimed to issue 4G licences by the end of the year.

China Telecom will offer its first 4G service on its trial LTE network during the Asian Youth Games in Nanjing next month. It is official communications sponsor of the event and will deploy at major games venues, tourist spots and hundreds of official games vehicles.

Chairman Wang Xiaochu last month confirmed that the operator, which runs cdma2000 and EV-DO networks, would roll out nationwide with both FDD and TD-LTE flavours of 4G. FDD-LTE will provide broad coverage around the country, while TD-LTE will be used to provide extra capacity in densely-populated urban areas.

Previously both China Telecom and China Unicom had been bearish on 4G, most likely because of the desire to maximise the life of their 3G investments.

By comparison China Mobile has firmly embraced it and in the past 18 months has built trial networks in 13 cities. Last month it called tenders for a national 100-city rollout.

Now both Telecom and Unicom have now stepped up their network investment and rollout plans to bridge the gap, the Economic Information newspaper has reported.

China Telecom will expand its forthcoming LTE trial from four to 31 provinces, and is preparing to call tenders. 

China Unicom, which is expected to rollout exclusively with FDD-LTE, is still at the trial planning stage. However, its initial deployment is expected to be around 31,000 base stations.

China Mobile’s national tender calls for the deployment of 207,000 base stations, but this year is expected to invest 80 billion yuan ($13bn) in 180,000 cell stations.

Analysts say the allocation of licences will likely spark an intense competition for 4G coverage. Each of the three operators will build out approximately 200,000 base stations over the next three years, the Economic Information said, citing “multiple industry sources.”

At an average cost of 500,000 yuan per base station, the direct investment in construction could be as much as 300 billion yuan.

Lowest bid: NSN surprises in China 4G tender

Nokia Siemens Networks has thrown a curveball into China Mobile’s multi-billion dollar 4G tender by undercutting the field.

It is the first time a non-Chinese telecom vendor has bid below Huawei and ZTE in a China contract.

The tender, to supply TD-LTE equipment for 207,000 base stations in 100 cities, is the world’s biggest telecom equipment contract this year. 

NSN’s bid of 33,000 yuan ($5,460) per single carrier was the lowest of nine vendors who took part, according to Chinese media reports. Huawei and ZTE both pitched 35,000 yuan.

The move has surely surprised the super-confident Huawei camp, which has publicly predicted it would win the biggest share.

Huawei and ZTE have supplied roughly three-quarters of the equipment for China Mobile’s pre-commercial rollout in 13 cities.  That’s only slightly below the 80% share of China Mobile’s TD-SCDMA 3G network contracts that they enjoyed. 

But foreign vendors have expected a much bigger piece of the globally-supported TD-LTE business, and were reportedly furious at the heavy weighting toward the local players in the trial stage.

As local tech website Sina Tech [zh] delicately observes, China Mobile now faces a “difficult choice.” As the lowest bidder, NSN “normally” would get the highest share.

“But for many years tenders by Chinese operators have tilted towards domestic suppliers, with Huawei and ZTE accounting for the lion’s share, [making it] impossible for foreign vendors to dominate.”

China Mobile is bound by rules of the tender to award to the lowest bidder, yet must “balance between Chinese and foreign” suppliers, it said.

The tender is sure to be watched closely by EU officials for any obvious domestic ‘tilt’. The EU Trade Commissioner has launched a probe into alleged state subsidies for Huawei and ZTE exports to Europe.