My take: 4G gear is now cheap enough it's time to stop building 3G except in the poorest countries. 4G is so much cheaper to run essentially every telco in the developed world is quickly migrating. That's a very good thing because carriers inefficiently using spectrum limit everyone's capacity.
China Mobile is proving it also make sense in less affluent countries. They have about ~140M LTE customers today and are adding 15M/month. They expect 250M by year end 2015.
A year ago, 4G phones cost $50-100 more than 3G. As new chips came out and competition developed, the gap has narrowed. Spreadtrum, 20% owned by Intel, say their new chips will bring LTE phone prices down to $65 or so.
Depending on how you measure, 4G LTE delivers 3 to 10 times as much capacity as 3G. (Using MIMO and carrier aggregation.) On a wall street call, a Verizon executive estimated 4G cost 70% less per bit delivered than 3G.
Adding 15M 4G subscribers per month, China Mobile is on track towards its goal of 250M 4G subs by the end of 2015. That overwhelms the results at both domestic and international alternatives. About six months ago, CM passed early leader Verizon (< 100M, I couldn't find a precise figure.) Yearend 2014, they had built 600,000 base stations and had 90M 4G users. That's about 3x the density of Verizon or AT&T's network, adjusted for China population being 4x the U.S. 400,000 more basestations are expected in 2015, topping 1,000,000. Fiber home is also coming strong in CHina.
TD-LTE phones are not that much more expensive than 3G phones.
China Mobile is distributing 40-50M phones each quarter but continues quite profitable. Mediatek, Spreadtrum and others are producing chips for only a few dollars more than 3G chips. The difference in materials cost between 3G & 4G is less than $10 on less-expensive phones. China Mobile's incredible volumes provide a mass market for TD LTE phones, which also are going to India, Russia, Japan and the U.S.
The finances remain under control during one of the largest network builds in history. Capex went up 40% but profits remain substantial. The stock price went up 40% as well.
The increased data demand drove revenues. "Data business showed a positive growth momentum with revenue of RMB253.1 billion, up by 22.3% compared to the previous year and as a percentage of revenue from telecommunications services increased to 43.5%, of which, revenue from wireless data traffic reached RMB153.9 billion, up by 42.2% compared to the previous year. Data traffic business became the primary driver of revenue growth, leading to a further optimized revenue structure." (From CM Chairman's note, below)
With tens of millions getting their first smartphone, data traffic skyrocketed over 100%. This is the same pattern we saw in the U.S. when smartphones became common. By 2012, traffic growth started falling dramatically. It's now about 50% and still falling. People who have smartphones for more than a year are increasing their usage about 40%, I've no reason to think the pattern in China will be different but there's little data.
2014 was an extraordinary year for China Mobile. Facing a complicated development landscape, the Group proactively aligned with the development trends of mobile Internet, focused on the strategic vision of “Mobile Changes Life”, accelerated strategic transformation and intensified reform. We firmly seized the valuable opportunities arising in the first year of full 4G commercialization, endeavored to promote transcending 4G developments with tremendous efforts and thereby, accomplished remarkable results and established new competitive advantages. Through promoting the transition from voice-centric to data-centric operations and facilitating the transformation and upgrade towards mobile Internet era, the Group maintained a favorable momentum of steady development in overall performance. 1 The Company defines EBITDA as profit for the year before taxation, share of profit of associates, finance costs, interest income, non-operating income (net), depreciation, amortization of other intangible assets and impairment loss of goodwill.
2 – Financial Results In 2014, the transformation from business tax to value-added tax and the adjustments of interconnection settlement standards had significant impact on our financial results, and the Group’s operating revenue was RMB641.4 billion, up by 1.8% compared to the previous year, of which, revenue from telecommunications services was RMB581.8 billion, down by 1.5% compared to the previous year. Data business showed a positive growth momentum with revenue of RMB253.1 billion, up by 22.3% compared to the previous year and as a percentage of revenue from telecommunications services increased to 43.5%, of which, revenue from wireless data traffic reached RMB153.9 billion, up by 42.2% compared to the previous year. Data traffic business became the primary driver of revenue growth, leading to a further optimized revenue structure. The Group proactively optimized its resources allocation, directing resources to key areas affecting its core competitiveness including accelerating 4G development, enhancing network capabilities and improving customer services quality. Profit attributable to equity shareholders decreased by 10.2% compared to the previous year to RMB109.3 billion, and the margin of profit attributable to equity shareholders was 17.0%. EBITDA was RMB235.3 billion, down by 2.1% compared to the previous year, and EBITDA margin2 was 36.7%. EBITDA was 40.4% of revenue from telecommunications services. The Group continued to maintain favorable profitability. Rapid 4G Developments By firmly seizing the arising opportunities, the Group spared no effort to promote 4G business and accomplished transcending 4G developments. Leveraging on our first-mover advantages in 4G, we swiftly established our 4G network capabilities. We started up 720,000 4G base stations and established the world’s largest quality 4G network covering a population of more than one billion people, realizing nationwide continuous coverage in almost all cities and counties as well as data hotspot coverage in developed rural towns and villages. Through expanding coverage and improving reliability of our network quality, we improved customer experience and laid the foundation for our first-mover advantages in 4G network capability. We proactively guided the development of the device supply chain to launch 4G devices of more diversified models at more affordable prices. We accelerated our customer migration to 4G network by offering new integrated tariff plans and providing more convenient and quicker upgrade services, and the number of our 4G customers demonstrated an accelerating growth momentum. As at the end of December 2014, our 4G customer base exceeded 90 million and 4G customers’ DOU reached 780M. Meanwhile, we have launched 4G international roaming services in 71 countries and regions, and accelerated the global development of TD-LTE through the efforts of GTI (Global TD-LTE Initiative). The transcending 4G developments established our leading position in the mar
?Ministry organized the "Broadband China" 2015 special action mobilization teleconference, the full deployment of the "broadband China" 2015 special action, and to develop a specific broadband development goals yesterday. Core objectives include: New 4G base stations over 600,000, 4G network covering the county and developed towns, the new 4G users over 200 million; new fiber to the home broadband users 40 million, using the access speed of 8Mbps and above broadband users accounting for 55%.
??Three operators have given their plans. China Mobile chairman Xi Guohua, said the year 2014, the development of China Mobile 90.06 million 4G users, "the quality and quantity speed" 4G network construction completed, covering most of the country to achieve a continuous County of; WLAN hotspot covering the number reached 467,000.
??Fixed broadband, Railcom, China Mobile is still a subject, 2014 Fiber to the home coverage has reached 14.44 million households, more than 4M broadband user access products reached 9.54 million, representing a 16.5% increase by the end of 2013. "Villages", the completion of the 7450 administrative villages and 400 rural schools broadband coverage.
??By 2015, China Mobile will further make wide so deep, so thick 4G network, 4G base target number more than 1 million, to achieve some of the rural data effectively cover hot spots, 4G subscribers will reach 250 million. New WLAN hotspots 9000, the new AP count 82,000.
??In the fixed broadband side, China Mobile will accelerate the construction of fiber-optic broadband, vigorously promote the construction of the pipeline resource residential and residential areas of sharing, we plan to add fixed broadband subscribers around 1.5 million, and will continue to carry out the construction of broadband villages adhere to upgrade urban and rural universal service speed, fixed wireless broadband and broadband speed go hand in hand.