Our existing \'counter consensus\' view on the outlook for Chinese Telecoms is based on the belief that LTE will cause a reversal of fortune among the key players. China Mobile will solve the biggest problem identified in our consumer research (slow data speeds) and will once again have the \'best\' mobile network in China on all dimensions. China Unicom, having gained strong momentum on the basis of their superior 3G data speeds will face a slowing of momentum – at least among high value customers seeking the latest technology

Over the last few weeks we have heard many arguments from China Mobile Bears as to why our hypothesis will be wrong. The initial arguments are usually targeted at the technology itself – that TD-LTE is a Chinese standard and a poor cousin to the much better FD-LTE more popular in Europe (it isn\'t), that it doesn\'t handle voice calls well (irrelevant – no operator in the world has launched a new LTE network with voice over LTE – in all cases they use existing 2G or 3G networks for voice), that handsets will not be available (ever heard of the iPhone? Not to mention Samsung, Sony, HTC, Huawei…)

China Mobile launched its TD-LTE network in Shenzhen for \'test\' operations in early November. We thought the best way to address the Bear\'s technology concerns was to go test the network for ourselves. Nearly 120 speed tests conducted from different indoor and outdoor locations supported our hypothesis that TD-LTE will be demonstratively better than Unicom\'s existing 3G network in data speeds. On average we experienced download speeds 10 times faster, upload speeds 7 times faster and a dramatic improvement in latency. We concur that service coverage for LTE is currently weaker, but locations meaningful to high value customers are already largely covered. Coverage will continue to improve as China Mobile rolls out new sites.

Over the last few years, China Mobile has underperformed the market while Unicom has outperformed – we attribute most of the difference in fortune of these two companies to the relative data speed of their respective 3G networks. We believe the launch of TD-LTE services by China Mobile will start the process of reversing this. Speed test in Shenzhen affirm our belief that TD-LTE technology works and is demonstratively superior to W-CDMA in data speeds.

Click to download Bernstein China Mobile - TD-LTE 18-Nov-13