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China Mobile gears up for 3G battle

CHINA Mobile outlets have begun selling small laptops equipped with 3G chipsets for Internet access, and to entice customers, the country's largest mobile phone company is also offering a discount of up to half the cost if consumers subscribe to the carrier's mobile broadband services.

The strategy, aimed at increasing the company's customer base in a highly competitive domestic market, is also expected to benefit computer makers, who have been hurt by a slowing economy, industry analysts said.

"It's a nice combination," Wang Yong, ZTE Corp's 3G division market director, said of the coupling of netbooks and 3G. "The super mobility improves the experience for 3G users and expand China Mobile's portfolio."

China issued 3G licenses to three mobile carriers in January.

The next-generation mobile communications networks allow users access to high-speed Internet, 100 times faster than 2G. They enable consumers to access the Internet anytime and anywhere with a mobile signal.

China Mobile has attracted 470 million users by the end of March, accounting for 70 percent of the total mobile subscriber base nationwide. But only 500,000 of that huge base are 3G users now and China Mobile expects to boost the number to 50 million within one year.

China Mobile's new marketing campaign offers 29 netbook models made by 17 personal computer vendors, including Dell Inc, Lenovo Group Ltd, Acer Inc and Hewlett-Packard Inc.

The netbooks, with 3G chipsets, are viewed as the mobile-end of China Mobile's TD-SCDMA (time division-synchronous code division multiple access) portfolio.

The netbooks, which cost between 3,000 yuan and 5,000 yuan (US$439 and US$732), feature 10-inch screens and Intel ATOM CPUs supporting basic functions and the Internet. Intel defines the netbook as any model with a screen smaller than 12 inches.

Subsidy offer

China Mobile provides users subsidies of more than 1,000 yuan on data services capacity if consumers agree to subscribe to the mobile broadband package for one or two years. It now charges users 50 yuan for 500 megabytes of data capacity monthly, and 100 yuan for 2 gigabytes - its two most popular packages.

"The idea of 3G netbooks is impressive but China Mobile had better adapt its business model," said Guan Dai, an analyst at In-Stat, a United States-based research firm. "Multimedia content is widely spread online, and it's hard to imagine a film (with the size of 400Mb to 700Mb on the Internet) costing users 50 yuan - too expensive for Chinese users." Carriers should charge users based on time online instead of using data traffic in 3G, Guan said.

In Shanghai, the netbooks debuted last Monday in 19 China Mobile outlets, and they will also be sold by retailers such as Gome and Yongle later, according to China Mobile's Shanghai branch.

In overseas markets, carriers like AT&T are penetrating into the PC retailing business.

On April 1, AT&T began selling netbooks in Atlanta and Philadelphia for as little as US$50 to users who also signed up for mobile broadband services for two years. Rival Verizon Wireless plans to offer small and inexpensive netbooks to customers this quarter.

In Western Europe, wireless service providers are already emerging as big PC vendors, where companies like Vodafone and Deutsche Telekom's T-Mobile began selling netbooks last fall.

25 percent

Wireless carriers already account for up to 25 percent of all small laptops sold in Western Europe, according to Richard Shim, a research manager at International Data Corp.

Shenzhen-listed ZTE, the country's biggest public telecommunications equipment maker, is one of the two major providers of 3G components and chipsets for China Mobile's netbooks. China Mobile is using domestically developed TD-SCDMA technology. Rival China Unicom will operate its network on the European WCDMA (wideband CDMA) model, while China Telecom has chosen US-developed CDMA 2000 technology.

China Unicom and China Telecom are using more mature 3G technologies, which means that China Mobile entered the market lacking the same range of products such as the iPhone 3G and HTC G1 which are popular cell phones.

Analysts said the netbook-3G linkup is the most efficient way for China Mobile to partner with PC vendors and provide itself with mature TD-SCDMA products. Compared with the adoption of chipsets on PCs, it costs much more time and money to develop a new TD-SCDMA phone model, said a PC official who declined to be identified.

"In China's 3G war, the most effective weapon is the attractive mobile phone or netbook," said Sandy Shen, an analyst at Gartner Inc, a US-based research firm. China Telecom and China Unicom haven't announced plans yet to launch 3G netbooks. China Unicom will get into that market by the end of this year, with Acer as one of its partners, J.T. Wang, Acer's chairman, said in Beijing three weeks ago.

The PC market is a channel for telcos to get more users to buy monthly wireless Internet-access service plans. The user can buy wireless Web access to save money on the upfront purchase price of PC.



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