China Mobile's TD-SCDMA Services off to a Slow Start

China Mobile's 3G services are off to a slow start. So far this year, fewer than 3 percent of new China Mobile subscribers have signed up for the operator's 3G service based on a locally developed mobile technology called TD-SCDMA, with the rest opting for 2G services.

China Mobile began offering 3G services based on TD-SCDMA (Time Division Synchronous Code Division Multiple Access) on Jan. 7, shortly after the Chinese government issued licenses to operators for 3G services. By the end of May, China Mobile had 746,000 subscribers for its 3G network, the company said in a filing with the U.S. Securities and Exchange Commission (SEC).

China Mobile is China's largest telecommunications operator. The company is listed in Hong Kong and the U.S., where its shares trade as ADRs (American depository receipts) listed on the New York Stock Exchange, making the company subject to regulation by the SEC.

While demand for China Mobile's 3G services has been sluggish, overall demand for mobile services remained strong.

During the first five months of 2009, the number of China Mobile subscribers grew from 457.3 million to 488.1 million -- an increase of 6.7 percent, or 30.8 million subscribers. TD-SCDMA subscribers represented 2.4 percent of the total increase in subscribers during that period.

Largely developed in China, TD-SCDMA is relatively unproven and less mature than other 3G technologies, such as WCDMA (Wideband CDMA), which have been widely deployed outside China. In addition, China Mobile is the only operator that uses TD-SCDMA for its 3G network.

As a result, there are very few handsets available that can make calls or access the Internet over a TD-SCDMA network.

China Mobile is counting on dual-mode handsets that support both TD-SCDMA and older GSM (Global System for Mobile Communications) networks to help spur more demand for its TD-SCDMA services, the SEC filing said. Dual-mode handsets will allow users to upgrade to 3G services without requiring them to change their mobile telephone numbers, it said.

In addition, the company will market laptops with TD-SCDMA data cards and home Internet access gateways to draw more 3G subscribers, it said.

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