In the early years of 3G, there was a significant time lag between deployments in developed mobile markets, and those in most emerging economies. Indeed, some of those still have sparse 3G availability outside major city centers and, in some cases, will move straight to 4G for further capacity and coverage enhancements.
In 4G, the pattern has been very different. Some of the very first commercial roll-outs were in unexpected markets (Uzbekistan was the first country to have two competing commercial LTE networks). And deployments have been going on in parallel in all kinds of economies, especially as some emerging markets have looked to LTE to improve overall broadband availability where wired infrastructure is lacking.
These trends are starting to inject new life into some of the world’s more sleepy state-owned telcos, which suddenly have new tools with which to meet their broadband obligations and a chance to improve their cost bases and competitiveness.
In Nigeria, the national telco was defunct, but has risen from the ashes with a new brand, NTel, and plans to offer LTE services in major markets from this weekend. After years of delay, the government completed the privatization of incumbent telco Nitel, and its mobile arm Mtel, last year. It has been acquired by a consortium called Natcom, which paid $252.5m and made its final payment this month, freeing the newly named NTel to start commercial operations.
Having been out of action for so long, NTel enters a market which is already crowded, but claims its newly minted 4G network will give it an advantage over rivals like the local subsidiaries of MTN and Bharti Airtel. MTN is the market leader with a 42% share, followed by Globacom, Airtel and Etisalat. The country also has 2.1m CDMA customers, and there are also several smaller LTE providers such as Smile and Swift.
NTel will offer its 4G services first in the largest two cities, Lagos and Abuja. CEO Kamar Abass says the firm now has deals with channel partners and all the required regulatory approvals from the Nigerian Communications Commission (NCC), including permission to offer VoLTE. So far, the company has deployed 200 kilometers of fiber in the cities of Lagos, Abuja and Port Harcourt, and about 600 mobile base stations in Lagos and Abuja running in the 900 MHz and 1.8 GHz bands and supporting LTE-Advanced with MIMO. A further 200 mobile sites are planned for this year.
Meanwhile, India’s troubled state telco BSNL is also preparing to launch 4G and hoping this will revive its fortunes and make it more competitive against private sector rivals like Bharti Airtel, Vodafone and Idea Cellular. It has conducted a soft launch of LTE services in Chandigarh and is now looking to roll out 4G in 14 of India’s 22 operating circles this year, though it has not given a firm timing. BSNL has rights in all the circles except the major metro areas of Delhi and Mumbai, which are the preserve of the second state telco, MTNL.
Initially, BSNL will deploy LTE base stations on its existing GSM towers to save on passive infrastructure costs, but it will no doubt be looking for partnerships in that area, since its 2G sites are unlikely to be adequate to enable good coverage for 4G – BSNL’s spectrum is in the 2.5 GHz TDD band, whose relatively high frequency means that a large number of cell sites are needed for universal coverage.
BSNL is currently deciding whether to pay for its new base stations upfront from the capex budget or to adopt a revenue sharing model with its vendors. In the latter approach, it would supply its passive infrastructure and spectrum, while a vendor or franchisee would provide the base stations. BSNL would own and bill the customers and would share the revenues with its partner.
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Almost every week brings another development, by a vendor or operator, to increase the capabilities of LTE, and increasingly those innovations will find their way onto the 5G roadmap too. The UK's EE took its LTE technology to the Gigabit Europe show, not an event that would, until recently, have been associated with wireless networks.
At LightReading's Gigabit Europe show, EE discussed plans to pilot gigabit LTE services before moving towards 5G from 2020. That would mean a sixfold increase in speed compared to EE's current peak of 150Mbps, which itself required carrier aggregation (of 20 MHz carriers in the 1.8 GHz and 2.6 GHz bands) to achieve. The operator has already trialled triband aggregation to get to peak speeds of 400Mbps and is likely to commercialize that technology in certain areas next year.
Paul Ceely, EE's head of network strategy, told the attendees: "We think 4G can get you to 1Gbps and are looking to run a pilot of that," though he did not give timescales - though it would clearly be a pre-5G effort, so presumably in the 2016-2019 period. Ceely said gigabit peak download rates would require a combination of carrier aggregation across as many as five carriers, and MIMO smart antenna arrays. The carrier has been heavily focused on 'Super Macro' developments, aimed at enhancing the coverage and capacity of its macro LTE-Advanced network in existing spectrum before moving on to densification with small cells. This contrasts with some MNOs, like SKT in Korea, which are pursuing densification first.
The high speed LTE network could compete with fixed broadband providers, or provide an adjunct to their services, in underserved rural areas, or among users who want to get set-up very quickly or move around frequently (this largely youthful user base is currently targeted by the Relish service from UK Broadband, which runs on TD-LTE in 3.5 GHz). The latter scenario is more likely given that EE will, regulators permitting, be part of fixed-line incumbent BT next year.
The gigabit network would need to involve EE's 3G spectrum in 2.1 GHz as well as its existing 4G frequencies (refarmed 2G spectrum in 1.8 GHz plus 2.6 GHz and 800 MHz), and future options could include 700 MHz and 2.3 GHz when those come up for auction. The 3G bands are increasingly being used for LTE around the world, and deployments in the main one, 2.1 GHz, have almost doubled in the past year, according to the GSA (Global mobile Suppliers Association).
In the early years of LTE, deployments mainly tapped newly auctioned spectrum or 2G bands, and some operators have already turned off 2G services altogether, like Korea Telecom, or have a firm timeline to do so, like AT&T. But some carriers are also looking at options to defocus on 3G, especially in countries where 3G deployment came late or did not extend very far, notably China, India and some African nations. Here, there is a logic to racing straight to 4G for mobile broadband, and even in strong 3G countries, many carriers are halting further expansion and starting to use excess 2.1 GHz spectrum for LTE-A.
Although W-CDMA/HSPA 3G standards will dominate this band for years to come, the GSA said regulators are helping operators to take a flexible approach in 2.1 GHz by allowing technology neutrality.
In total, 36% of LTE devices work on the 2.1 GHz band, compared to 28% in 2014, says the GSA, and there are 1,185 devices available from 142 vendors. The Association found that 15 operators in 11 countries have launched LTE on the 2.1GHz band, double the year-ago figure. Alan Hadden, VP of Research at GSA, said: "The number of LTE2100 compatible devices more than doubled over the past year (118% higher). Band 1 is the third most supported band for LTE devices, following 1800 MHz (Band 3) and 2.6 GHz (Band 7)."
Investors pleased with improvement in operating margins while CEO Combes says Shift Plan on track
By Caroline Gabriel
China, now the world's largest mobile market, looms large in every vendor's results this quarter. Rising competition from Chinese suppliers is really starting to be felt in smartphones, but in infrastructure, the major players have largely adjusted - however painfully - to their new competitive landscape, and the massive presence of Huawei. Alcatel-Lucent has suffered for years from those new rivalries, but in its second quarter, it showed how Chinese growth is also an opportunity. Its highlight was better than expected performance in wireless equipment, particularly driven by Chinese sales, and somewhat offsetting some disappointments in its crown jewel, the core router business.
CEO Michel Combes said his 'Shift Plan' - the last and most promising of a series of turnaround programs at ALU since its troubled merger - was on track and reiterated his goal of achieving positive free cashflow by the end of 2015. The most positive metric for investors was the improved operating margin, up to 4.1%, from 1.3% in the year-ago quarter.
Revenue was up just 0.7% year-on-year to €3.28bn, in line with analyst predictions but well below growth at Ericsson (5%) and Huawei (but better than Nokia's 8% top line drop). Core operating profit tripled to €136m, well ahead of forecasts, and gross margin rose from 31.2% to 32.6%.
Combes also said he was continuing a key aspect of the Shift Plan, divesting non-core assets, and will seek an IPO of the submarine cable unit in the first half of next year.
The ongoing cost cutting program, which has been intensified since Combes took over from predecessor Ben Verwaayen, helped boost the operating margin, as did strong LTE sales in China and the US. But the costs of the restructuring kept ALU firmly in the red, with a net loss of €298m. This was, however, much reduced from the year-ago figure of €885m. ALU has failed to post more than one-off quarterly profits since its creation in 2006, and Combes is addressing the challenge with promises to cut 10,000 jobs and €1bn in costs, as well as to offload a further €1bn in assets.
That will see ALU focusing its business on a narrower range of activities, with converged IP networking and cloud platforms as the main growth engines. Unlike rival Nokia, which is focusing entirely on mobile broadband, ALU has designated mobile-only networks mainly as a cash generator, and is integrating its LTE activities with fixed IP. It recently decided to outsource R&D in 2G and 3G technologies, reserving its inhouse investments, and its famous Bell Labs, for 4G and beyond.
Meanwhile, core and edge routers are increasingly its most important business, and some analysts say the router unit would be worth more, on its own, than ALU is now. However, in Q2 some analysts had looked for more growth there, and for once, LTE was the highlight.
In the Q4 earnings call, Combes said: "This fourth consecutive quarter of consistent execution has enabled us to close the first chapter of the Shift turnaround plan."
Long downturn in its home region may be coming to an end, but growth all comes from emerging markets
By Caroline Gabriel
Vodafone's quarterly results showed a familiar pattern, with emerging market growth somewhat offsetting European slowdown, but there are also signs that the long stagnation in its home region may be ending.
The first half of 2014 may mark "the low point of its European trends", Macquarie Research analyst Guy Peddy told Bloomberg. Performance there has stabilized, though Vodafone is still having to pour large sums into its networks to shine in a region which is both recession-struck and hugely competitive. "The company is playing network catch-up and investing heavily," said Peddy. Vodafone will invest £19bn ($32bn) on its network improvements over the next two years.
The UK-based giant pleased the City of London with a smaller than expected decline in revenue in its first fiscal quarter, mainly driven by burgeoning mobile usage in India and parts of Africa. Overall, service revenue was down 4.2% year-on-year to £9.4bn, slightly better than the 4.4% drop predicted by analysts. Total revenue was down 4.4% to £10.2bn, excluding acquisitions and currency fluctuations.
In Europe, which brings in about 65% of service revenue, the operator said there was "evidence of commercial improvement" in Germany, Italy and the UK, although all three suffered declines in revenue. Overall, European service revenues were down 7.9% year-on-year, with Italy recording a 16.1% fall.
Germany, the biggest market by revenue for Vodafone, is starting to recover from last year's network quality problems, but Spain is still showing few signs of turnaround as prolonged economic downturn drives customers towards cheaper devices and plans. Vodafone recently announced the acquisition of local fixed line provider Ono, as part of its region-wide strategy to invest in wireline infrastructure and create a quad play to rival that of cableco Liberty Global.
"Our performance is beginning to stabilize quarter-on-quarter in several of our European markets, with customer appetite for 4G services clearly growing," said CEO Vittorio Colao in his statement, sending the stock up 2.1% to 202p (though it has lost 33% so far this year, before the results).
The operator's Africa, Middle East and Asia business group saw a 4.7% rise in service revenues and the largest market in this division, India, enjoyed the best performance, with the shift to 3G spurring a 10.3% revenue improvement.
The African regional operator Vodacom, in which Vodafone holds a 65% stake, said revenues were up 4.3%, driven by a 23% increase in data income, especially in Tanzania, Mozambique and Lesotho.
Vodafone had warned in May that profits would be hit during the full fiscal year, which ends in March 2015, by the huge Project Spring infrastructure upgrade plan as well as European price wars. It has forecast that EBITDA will fall to a range of £11.4bn to £11.9bn, down from £12.8bn last year.
In the face of Vodafone's acquisition spree - which is reminiscent of its glory days under Chris Gent and includes the major Kabel Deutschland purchase - credit ratings agency Moody's recently stripped the firm of its A3 status, reducing it to Baa1, the third lowest grade. Moody's commented in a statement: "The renewed investment focus from Project Spring could turn out to be a powerful competitive advantage for Vodafone, but the company will have to demonstrate that it is able to regain pricing power from this network differentiation strategy."
Chip giant beats Wall Street forecasts with quarterly results, but warns of licensing shortfalls in China
By Caroline Gabriel
Qualcomm's quarterly cycle this year is becoming predictable - it warns of problems ahead in China, then delivers strong results anyway. Three months ago, it reported solid performance for its fiscal second quarter, but disappointed Wall Street with a downbeat forecast, largely because of uncertainties in the Chinese market. It predicted fiscal Q3 revenues at the low end of analyst expectations, between $6.2bn and $6.8bn, but in fact, has turned in a sales figure of $6.81bn, up 9% year-on-year. Net income was $2.24bn or $1.31 a share, while non-GAAP earnings were $1.44 a share.
The figures comfortably exceeded Wall Street estimates - analysts had targeted non-GAAP earnings of $1.22 a share on revenue of $6.52bn. However, this was only the second time since 2010 that Qualcomm had reported less than 10% year-on-year revenue growth in any quarter, a sign of the growing competition in its core smartphone processor space.
The cycle of warnings followed by over-achievement is not, in this case, just a corporate tendency to manage Wall Street expectations but a genuine sign of the unpredictability of the Chinese market, on which - like most companies in the mobile food chain - Qualcomm is dangerously reliant. "The company's guidance is becoming harder to achieve given the apparent delays in the roll-out of LTE in China," Bill Kreher, an analyst at Edward Jones & Co, told Bloomberg in April. "In the near term, results may be choppy."
His predictions are proving right, and Qualcomm CEO Steve Mollenkopf admits: "The launch of LTE in China is very important to Qualcomm, and it's difficult to predict." The company is particularly eager to see China Mobile's base convert to 4G, as it has created a TD-LTE iPhone for the carrier, but also because it has effectively been excluded from royalty revenues in the operator's 3G technology, TD-SCDMA.
There are other issues in China however, including probes by the NDRC government body into antitrust and corruption - seen by some as part of a broader assault on the US firm's market and IPR position - and difficulties in getting full revenues out of the complex customer base. In its new quarterly statement, Qualcomm reduced its outlook for the current fiscal Q4, because some Chinese licensees "are not fully complying with their contractual obligations to report their sales of licensed products to us".
It cited "certain licensees under-reporting a portion of their 3G/4G device sales and a dispute with a licensee" as well as possible delays in signing new licences while the NDRC investigation is ongoing.
The gap is significant - while Qualcomm expects 1.3bn 3G/4G devices to ship in calendar 2014, the number that will be reported to it for licensing purposes will be between 1.04bn and 1.13bn, because of "units that we believe may not be reported to us, are in dispute or are currently unlicensed. We are taking steps to address these issues."
Qualcomm president Derek Aberle said on the analyst call that "we are experiencing some near-term challenges in the licensing business, particularly related to China. This is something that we will take care of. "But he added, echoing other unknowables in the Chinese business, "the timing is pretty uncertain".
Licences deliver the bulk (at least two-thirds) of Qualcomm's profits and shortfalls in that area cannot be fully offset by any strong trends in chip sales, which have far lower margins. So the disputes will hit the current quarter - net income in the quarter ending in September will be $1.03 to $1.18 a share, Qualcomm forecast, disappointing analysts, who had looked for $1.23.
However, chips account for most of the firm's revenues and rising sales of high end chips will propel revenues in fiscal Q4 to between $6.5bn and $7.4bn, in line with consensus Wall Street predictions of $7.13bn. In fiscal Q3, Qualcomm shipped a record 225m chips, up 31% on the year-ago period, and the number could rise as high as 245m in the current quarter, which would be a 29% increase. New launches from its two largest customers, Apple and Samsung, as well as Chinese LTE, should boost the second half of the year, though there are fears of those handset giants losing share to lower cost vendors, which may not be Qualcomm customers - especially Chinese manufacturers, which often turn to local suppliers such as MediaTek.
Those competitive shifts, and a general move towards lower cost smartphones, are challenging to Qualcomm and will accelerate its efforts to expand in other markets such as the WiFi home and the internet of things. But those trends are fairly well understood and have been factored into analysis of the US giant for some time. By contrast, the Chinese market, especially the licensing and antitrust issues, are creating nervousness with their unpredictability.
Suji De Silva, an analyst at Topeka Capital Markets, told Bloomberg: "Qualcomm told investors that they had the China customers under contract, that it's all worked out. Now we're getting a sense that it's still a challenge. Qualcomm is trying to monetize its technology and China is a more challenging market."
Qualcomm has been investing heavily in China to build a local ecosystem and strengthen its ties with the big three operators there. Simultaneously with its results statement, it announced a commitment to plow up to $150m into Chinese start-ups at various stages, in the important growth areas of ecommerce, semiconductors, education and health. The activity will be managed by Qualcomm Ventures and the first recipients of funding are Cambridge WoWo and Boohee, in mobile education and healthcare respectively.
The vendor was keen to stress its long term engagement in the Chinese market and said it has had several Chinese investments with successful exits (such as Enorbus (acquired by Walt Disney); Aicent (acquired by TA Associates); and NetQin. Other investments in the country include rising handset star Xiaomi, as well as Thundersoft, MadHouse, CooTek, Yongche, Dolphin Browser, Alo7 and Hawkeye.
With a clear nod to the antitrust investigators, Mollenkopf said in a statement: "Since first introducing our technology and products in China well over a decade ago, Qualcomm has contributed to China's wireless industry through investing in research and development, licensing our advanced technologies, and providing the most advanced chipsets to Chinese companies. Our strategic collaboration with and technical support of the Chinese wireless industry has helped this vibrant ecosystem, helped drive direct and indirect employment, and contributed to economic growth in the entire Chinese wireless industry."
UK firm reports seasonal slowdown, but licensing revenues up by 42%, pointing to stronger growth ahead
By Caroline Gabriel
ARM reported a seasonal slowdown in its second quarter results, but these were still better than the markets had expected, with pre-tax profit up more than fourfold at £68m (from £15m the year before). The dominant mobile processor IP company expects an uptick in the second half, as does one of its most important customers, Qualcomm, but these smartphone powerhouses know they need to diversify their revenue streams too, to avoid these seasonal dips becoming permanent.
ARM's revenues were up 17% year-on-year to $309.6m (though top line growth in UK pounds was 9%, to £187.1m), which was solid for the time of year, though slower
The UK company said its adjusted operating margin improved to 48.9%, from 48.6% in the year-ago period and earnings per share were 3.91p, from 0.75p. The results included an £8.4m restructuring charge connected to layoffs of 130 staff.
The biggest contributor to revenue growth was licensing, up 42% in dollar terms to $146.1m. ARM signed 41 new licences during the quarter. Overall shipments also rose in the quarter, up 11% year-on-year to 2.7bn chips.
By contrast though, royalty revenue grew by only 2% in dollar terms, and the company blamed slowing demand for smartphones because many operators are trying to sell off 3G models while transitioning to 4G. That has created some slowdown at the high end, amid a general rebalancing of the handset industry's growth towards emerging markets and lower cost smartphones.
CEO Simon Segars acknowledged, on the analyst call, that royalties had been hit by "seasonal trends in inventory management in parts of the electronics supply chain" as carriers worked through their 3G inventory. However, he believes this trend will create a shift towards higher end and 4G models in the second half of the year and pointed to a "healthy pipeline of opportunities", which should boost revenue growth in the third and fourth quarters.
"Our continued strong licensing performance reflects the intent of existing and new customers to base more of their future products on ARM technology," Segars said. "This bodes well for growth in ARM's medium and long term royalty revenues."
However, many analysts are cautious about ARM because of its exposure to smartphones, a segment in which prices and growth are slowing. Jasmeet Chadha of Bernstein Research told the Financial Times: "Long term, the view across the market has been that smartphone growth will slow. Half of ARM's business is exposed to smartphones. There are opportunities in the internet of things and wearables, but these will ramp over several years and are small today and do not yet represent half of ARM's business. Structurally, the group's royalty growth is likely to slow." The rising threat of Intel in core markets, and the strength of the British pound, are also negatives around ARM at the moment.
But the firm has been investing huge efforts in diversifying its business and building on its dominance in handsets. It has released processor designs, and announcing licensing deals, in several new areas. Its first 64-bit platform is targeting high performance devices and servers, while it has been expanding its microcontroller and ultra-low power architectures for the internet of things.
The biggest bellwether of the mobile processor market, Qualcomm, reports its quarterly results on Wednesday. Like ARM, it expects the second half of the year to be significantly stronger than the first as it deals with falling handset average selling prices and the 3G-4G transition in China and other key markets.
High end smartphone makers could suffer as China demands lower subsidies, and Korea mandates discounts for low end plans
By Caroline Gabriel
Handset subsidies are one of the most contentious issues in the traditional mobile operator model. Carriers bewail the way they eat into profits but many attempts to ditch the practice have failed because of consumer attachment to the low upfront fee for a high end device. Some operators are devising new approaches, notably by providing instalment payments on smartphones, as in T-Mobile USA's 'Uncarrier' scheme. But in many Asian countries, the decisions are further complicated by government regulation of the issue.
In China, the authorities recently told the three mobile operators that they must slash their marketing expenditure, particularly their high levels of spending on subsidies (as well as advertising), to boost uptake of new 3G and 4G services. The SASAC (State-owned Assets Supervision and Administration Commission) told China Mobile, China Unicom and China Telecom that they must reduce their combined marketing spend by CNY40bn ($6.4bn) over the next three years.
This could create yet another problem for Apple, whose Chinese market share has fallen in recent months despite finally netting a distribution deal with China Mobile, the largest cellco. With no low cost model to offer, Apple is heavily reliant on carrier subsidies to make its iPhones affordable, although it has also embarked on some financing deals of its own.
According to a research note from analysts at UBS, around 60% of handsets sold in China are subsidized, and a shift in this pattern will mainly impact the high end of the market, which accounts for about 20% of sales. Apple has about one-third of this high end segment in 2013. By contrast, reduced availability of subsidies should increase the speed of expansion by lower cost, often local vendors such as Xiaomi, Lenovo and Coolpad.
The three operators, especially China Mobile, have repeatedly complained about the impact on their profits of subsidies, which has been felt since the carriers introduced 3G services with their accompanying more expensive devices. Mobile started selling the iPhone at the start of this year and its CFO, Xue Taohai, says this is one reason why subsidy costs will rise by 29% this year.
In nearby South Korea, the three main cellcos have repeatedly landed in hot water with the authorities over excessive subsides, and earlier this year, all three were suspended from signing new subscribers for at least 45 days, for violating caps on subsidies.
Now the government and the regulator, the Korea Communications Commission (KCC), have introduced new rules, which apply to low end handsets too. The KCC says it will move away from its current subsidy cap of KRW270,000 ($265) per device. Instead, it will reflect the fluid nature of the market by adjusting the subsidy cap every six months based on market factors including competition. The ceiling will always be in the range of KRW250,000 to KRW350,000.
The government has also introduced additional new rules in this sensitive area, requiring operators to offer subsidies for low cost plans as well as the expensive deals attached to costly smartphones. The size of the subsidy will be dependent on the cost of the monthly contract. Carriers will also be mandated to offer discounts to new subscribers who wish to continue using their old devices; to those who were not offered a subsidy when they signed up; and to users of smartphones more than two years old.
The ministry of trade said the changes aim to prevent cellcos from attracting customers to the most expensive monthly plans with top end smartphones at low upfront cost.
Turkcell uses tri-carrier 3G+ technology to boost speeds even where it is not yet upgrading to LTE
By Caroline Gabriel
Not all the efforts to drive up mobile network speeds are focused on mythical 5G, or even on emerging LTE-Advanced. Ericsson showed off some far more pragmatic breakthroughs last week, with the world's first live demonstration of three-carrier HSDPA, achieving speeds of 63Mbps on the downlink; as well as Enhanced Uplink Multicarrier (EUL-MC) which delivered 11.5Mbps on the uplink.
Just as EDGE continued to be enhanced and deployed well into the 3G era, so HSPA technologies have their own roadmap and will complement LTE for many operators - a pattern common in parts of Europe has been to use 4G for urban metrozones while keeping 3G+ for wide area data coverage; other carriers intend to keep stretching their 3G limits in order to defer any investment in 4G for a few years. Ericsson, which has significant market share and IPR in the 3G technology family, says multicarrier HSPA will be an important complement to LTE and will provide "a mobile broadband experience of comparable quality".
The demonstration took place on a commercial network owned by Turkcell, using a Qualcomm-powered smartphone. The three-carrier capability will be included in Ericsson's software release 15A. It is engineered to increase user downlink rates by up to 50% throughout the cell, (compared to single carrier), regardless of network load. This test was performed in the 2.1GHz band, using three 5MHz carriers for downlink and two for uplink.
Turkcell currently has a dual-carrier HSDPA network supporting speeds of up to 43.2Mbps and 5.76Mbps.
3C-HSDPA is designed to allow simultaneous downlink transmissions on up to three 5MHz carriers to a single user. It supports both single-band and dual-band transmission.
EUL-MC, which is included in Ericsson software release 14B, increases uplink speeds by up to 100% by supporting simultaneous uplink transmissions on two 5MHz carriers, regardless of load conditions, and applying to all areas of the cell. Both these HSPA features should be commercially available in devices towards the end of this year.
All three operators now have paired and unpaired spectrum, but will wait until 2015 for commercial FDD, and 2020 for sub-1GHz
By Caroline Gabriel
China Mobile suffered from being the only major cellco with TDD spectrum for 3G, but has lobbied successfully to grasp the advantage back in 4G. It got its wish that initial allocations, for itself as well as China Unicom and China Telecom, would be in unpaired spectrum, where Mobile has a considerable headstart in expertise, ecosystem and roll-outs. But its rivals may not have to wait too long to receive their preferred, FDD licences too, and all three companies have already been awarded trial rights.
However, it seems likely they will have to wait until 2020 to gain usable spectrum in 700MHz, coveted for its long range and indoor penetration, which greatly reduces the cost of rural build-outs and initial, coverage-driven LTE projects.
Initially, then, all three companies will have higher band spectrum, both paired and unpaired, though it could take a year or even two for the FDD trial licences to be converted into commercial ones (there was a wait of about two years for the same process in TDD, though the huge 'trial' networks which China Mobile constructed during that time were hardly just testbeds.
The length of the wait will be significant for the two smaller operators, whose 3G networks are FDD, and which would prefer to lead with paired frequencies in LTE too, adding TDD at a later stage, for capacity, when the ecosystem has matured. However, Mobile's lobbying for TDD-first means they will have to adopt a hybrid TDD/FDD strategy, a fact which should stimulate the equipment and device ecosystems - another key Mobile objective - but could also make a RAN sharing deal between all three players more likely.
Talks about such an agreement are reportedly ongoing, and the long wait for 700MHz, which improves cost efficiencies for LTE, may be another incentive to come to a deal.
Last week, China Telecom was granted a trial FDD licence so that it can start building networks in major cities immediately, and Unicom and Mobile quickly received their own similar allocations. The bands were not specified but was certainly not sub-1GHz.
China faces the same tensions and trade-offs between the broadcasters, incumbent in the 700MHz spectrum, and the mobile operators, eager for the digital dividend in frequencies which are particularly suited to affordable wide area coverage. The head of China's broadcasting regulator, GAPPRFT, Jiang Wenbo, said this week that it will not complete the handover of the 700MHz spectrum until 2020.
Asia's band plan for 700MHz could be basis for near-global harmony, though EMEA will only follow after 2020
By Caroline Gabriel
There are high hopes that the 700MHz band could become harmonized LTE spectrum in almost as much of the globe as 1.8GHz, and with better propagation for rural and indoor coverage. Although North America has a different band plan in this spectrum, most Latin American countries are following Asia's APT700 approach, and when the EMEA region opens up the frequencies, its regulators will be under pressure to be as compatible as possible too, to improve device economics and roaming.
The first commercial LTE service in the APT700 band has just gone live, courtesy of Taiwan's FarEasTone, using a network supplied by Ericsson. This is part of a broader agreement with the Swedish vendor, to provide 3G expansion, 4G and core networks.
Backers of a near-global band in 700MHz say it could eventually serve more than 2.1bn people and overtake the current leader in terms of 4G build-out, the 1.8GHz former GSM spectrum. FarEasTone won licences in both these bands at last year's auction in Taiwan, but passed on the other frequency on offer, 900MHz.
That has been less popular than 1.8GHz as a candidate for 2G refarming, because it has lower capacity and because many carriers will keep it for GSM for the foreseeable future - for universal coverage, M2M and other purposes - while migrating 1.8GHz to LTE. However, LTE900 is being adopted in some areas, particularly the Middle East, and Vodafone Czech Republic has used it, in combination with 3G, to support its Turbo Internet offering. The LTE900 element now covers 54% of the country, though its speeds are closer to those of 3G than new generation 4G, at 16.5Mbps peak.
The EMEA region opened up 800MHz as its first sub-1GHz, digital dividend band for LTE, while some other parts of the world led on 700MHz. Europe, the Middle East and Africa will eventually harness 700MHz for wireless too, and will have their proposals in place for the next World Radio Conference, with a view to commercial services in the early years of the next decade.
As so often, UK regulator Ofcom is an early mover in defining the rules. It has launched a consultation into changing the allocation of the 700MHz digital TV band, aiming to move broadcasting out of the spectrum by 2022. France, Sweden and Finland have also announced plans to use the band.
Under the Ofcom proposals, the release of 700MHz spectrum would come after that of 190MHz of capacity in the 2.3GHz and 3.4GHz bands, which are currently controlled by the Ministry of Defence and will be made available during the 2015/16 financial year. The 700MHz sale could follow as early as 2016, but 2020 is a more probable date.
Ofcom CEO Ed Richards said: "Ofcom's role is to ensure the UK makes the best and most efficient use of its airwaves, which is vital to enable UK's digital economy to meet consumers' needs. Our plans will allow digital terrestrial TV to thrive, while ensuring the UK's mobile infrastructure can support consumer demand and economic growth."
The consultation closes on August 29, with Ofcom expected to publish its plans in late 2014 or early 2015. It claims a major switchover of TV aerials, as seen in 800MHz, will not be necessary this time.