China Mobile and Vodafone Strengthen Strategic Coordination

China Mobile and Vodafone have signed a Strategic Co-operation Framework Agreement in Barcelona, according to China's official Xinhua news agency. Under the agreement, the two telecoms giants will continue to cooperate in various areas of their business, including exchanges in corporate management and also in technical and operational expertise. They will also work together in areas such as enhanced roaming services, multinational customers, green technology, network roadmap management, joint innovation and research and development. They will also promote converged Long-Term Evolution (LTE) technology and LTE terminal development as the industry moves towards 4G as the next step in mobile broadband.

Meanwhile, China Mobile has said it is seeking partners to bid for network licences overseas to share the risks of global expansion, according to China Daily. Partnerships may be a less risky alternative for China Mobile than the full acquisition of an existing operator, said Li Zhengmao, a vice-president at parent company China Mobile Communications Corp. The company has also said it is seeking opportunities for investments or partnerships to speed up the global adoption of the Chinese-developed 4G mobile system called TD-LTE. On Monday (14 February) at the Mobile World Congress in Barcelona, China Mobile announced the formation of the Global TD-LTE Initiative to promote development of the TD-LTE. Vodafone, Softbank and Bharti Airtel are among international companies that will cooperate on the development of the TD-LTE technology standard, said China Mobile.

Outlook and Implications

Strategic Partnership: China Mobile and Vodafone have had a long-standing strategic partnership. Vodafone initially bought a 2.18% stake in China Mobile in 2000, and then increased its shareholding to 3.20% in 2002. Since the initial investment, the two mobile giants have enjoyed a strategic co-operation in areas such as roaming, network roadmap development, multinational customers, and green technology. On 8 September 2010, Vodafone announced an agreement to sell its entire 3.2% interest in China Mobile, as part of its attempts to divest from non-core assets. However, the commercial and technology co-operation between the two companies continued. Both companies hope to be able to improve their competitiveness and raise their influence on value chain and technology development by partnership in management, technology and operation (see United Kingdom—China: 8 September 2010: Vodafone to Sell 3.2% Stake in China Mobile for US$6.6 Bil.).

International Expansion and Development of TD-LTE: China Mobile has been looking for opportunities to expand abroad as the company faces the slowing revenue growth at home. The operator first expanded overseas in 2007 when parent company China Mobile Communications acquired Pakistan's Paktel, after a failed attempt to acquire Millicom's emerging-market assets. Although China Mobile has since repeatedly expressed its intention to expand its international footprint, little progress has been made so far. The world's largest mobile operator by subscribers may also help push TD-LTE technology to the international market. China Mobile Chairman Wang Jianzhou has said it will aim to expand in emerging markets first, but it will also consider any projects that would help the development of TD-LTE technology. The Ministry of Industry and Information Technology (MII) gave approval to China Mobile in December last year to begin large-scale tests of the TD-LTE technology. The commercialisation of the new technology, however, will not begin by the middle of next year, according to the MII (see China: 5 January 2011: China Mobile to Expand TD-LTE Testing).