China Mobile to rely on 4G, iPhone

The world's largest mobile carrier — with more than twice as many subscribers as there are people in the United States — already has more than 10 million of its customers owning an iPhone even though the gadget doesn't properly work with the Chinese firm's homegrown TD-SCDMA 3G technology, which is not compatible with global technologies.

That inferior technology, and the failure to offer customers an iPhone contract — which its main rivals do — has been a key reason for China Mobile's slowing profit growth.

The company, valued at US$220 billion or half an Apple, says profit rose just 2.7 percent last year as it grappled with fierce competition and higher costs.

The Beijing-based phone company said on Thursday that it earned 129.3 billion yuan (US$16.7 billion) in 2012. Revenue climbed 6.1 percent to 560.4 billion yuan (US$72 billion).

China's three state-owned phone companies are facing increasingly fierce competition as well as costly technology upgrades to support smartphones, tablet computers and other devices. China Mobile said it was stepping up a strategic transformation amid the “challenging backdrop.”

While many of China Mobile's iPhone users have found clever ways around some of the carrier's limitations, the company wants to close the gap with its two smaller rivals — China Unicom and China Telecom — which already offer iPhone compatible technology.

Industry experts expect Apple's next iPhone will support China Mobile's TD-LTE 4G technology, even though this will be less widely used than the FDD-LTE standard.

“Apple's iPhones will be like a killer app for China Mobile once its gets its 4G up and running,” said Huang Leping, an analyst at Nomura International in Hong Kong. “That will definitely boost user numbers, though it will weigh on the bottomline in the first year or so as China Mobile will most probably have to provide heavy handset subsidies for the iPhone.”

China Telecom, which signed up to sell the iPhone last year, increased its spending on handset subsidies by 50 percent in the first half of last year, and has seen its profits fall in the last three quarters on higher marketing and subsidy costs.

Most of China Mobile's 715 million subscribers are no-frills users attracted to its wide network coverage across the vast country. Only a small number are premium, tech-savvy consumers.

Just 13 percent of its users are on 3G, compared with one third at China Unicom and 44 percent at China Telecom, which use other variants of CDMA 3G technologies developed by global players such as Japan's NTT Docomo and Qualcomm Inc.

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