Weekly Telecom Notes: AT&T, China Mobile & China Unicom

The past week saw quite a few developments in the telecom sector. AT&T (NYSE:T) announced that it has met its year-end LTE target of covering 150 million Americans with the high-speed network more than a month ahead of schedule. Chinese carriers also came out with their subscriber additions for the month of October as China Mobile impressed with its 3G additions, coming ahead of China Unicom for the third month in a row. Helped by the slowing iPhone demand on rival networks ahead of the anticipated launch of iPhone 5 in the coming months, the world’s largest wireless carrier added 3.7 million 3G subscribers during October, quite a bit more than China Unicom’s 3.2 million 3G additions in the same month.

AT&T

With Verizon (NYSE:VZ) racing away with its 4G LTE expansion plans, AT&T doesn’t want to be left too far behind. The second largest U.S. wireless carrier made a series of launches late last week that helped it reach its targeted year-end LTE coverage of 150 million Americans more than a month ahead of schedule. This came only a month after Verizon announced that it exceeded its year-end target of covering 400 markets and 250 million Americans with LTE. With 2013 expected to be a big year for high-speed LTE, AT&T has also drawn up an elaborate plan that will see it spend as much as $14 billion on network upgrades over the next few years to not only improve network quality and spectrum efficiency but also expand its 4G LTE network to new markets.

The huge investment plan is a bet on the growing customer demand for high-speed networks that can efficiently transfer large amounts of data without clogging up. In addition to spending on infrastructure upgrades, AT&T is bolstering its spectrum position with a host of spectrum deals that will help it expand 4G LTE coverage and increase network capacity. (see AT&T Continues Acquisition Spree To Meet LTE Spectrum Needs) As LTE adoption grows and the technology gradually becomes a network standard, AT&T needs to catch up with Verizon’s far wider LTE network in both coverage and quality to avoid losing market share in an increasingly saturated wireless market. (see AT&T’s Ready For Data Pay Dirt After Speedy LTE Rollout)

China’s 3G story

China Mobile recently announced a strong set of subscriber numbers for October, adding more 3G subscribers than second-placed China Unicom for the third month in a row. The largest wireless carrier in the world now has more than 700 million subscribers, a long way ahead of China Unicom and China Telecom, both of which combined have less than 400 million subscribers. In 3G however, China Mobile has lagged rivals this year, adding only about 27 million 3G subscribers since the beginning of 2012 as compared to China Unicom’s roughly 30 million YTD. The recent strong showing by China Mobile in 3G could therefore a welcome sign that the carrier is working with handset makers to increase smartphone adoption on its network. It might however just as well be only a temporary upswing in China Mobile’s fortunes, as users await the launch of the new iPhone 5 on rival networks in the coming months. (see China Unicom Stutters in 3G Race As Customers Await iPhone 5 Launch)

Either way, we see China Mobile’s 3G disadvantage (lack of the iPhone and an incompatible 3G network) as only a near-term one since 3G adoption in China is only in its initial stages and there is ample time for the carrier to increase penetration. But it will have to work with handset makers to get more popular smartphones to work on its 3G network and also roll out 4G LTE at a faster rate if it doesn’t want to lose out on the huge market share advantage it has in the Chinese market. (see China Mobile Sees Faster 3G Adoption And Still Has Immense Growth Ahead) China Mobile’s huge market share advantage over rivals means that Apple will look to sign an iPhone deal with the carrier soon, and this could cut into China Unicom’s near-term advantage. However, with 2G subscriber growth slowing and 3G still in early stages of penetration, there is significant growth potential for China Unicom as well.

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