China Mobile is in a comparatively weak position without its own operating system.
Beijing. November 27. INTERFAX-CHINA - China Mobile is developing an operating system for TD-SCDMA mobile phones based on Google's Android platform, a China Mobile source told Interfax on Nov. 26, in a move analysts say shows the company's intent to claim a larger stake in the mobile Internet market.
"The system, called OMS (Open Mobile System), is Linux-based and uses Android source code. It will integrate some of our own applications designed with the [Chinese developed 3G] TD-SCDMA network in mind, and will be similar to the iPhone in concept. Currently we call OMS handsets under development 'Ophones'," said the source, who asked not to be identified.
Earlier this month, Interfax reported that Lenovo Mobile will manufacture Ophone mobile handsets that combine Android and TD-SCDMA functions for China Mobile, with a launch date scheduled for the first quarter of 2009.
Another source at Lenovo Mobile told Interfax on Nov. 26 that the Ophone will will integrate nearly all of China Mobile's mobile services. "OMS is an Android system with TD-SCDMA features. China Mobile would like to create an operating platform distinct from Android which can take advantage of the company's TD-SCDMA network," he said.
"The Ophone demonstrates China Mobile's ambition to establish itself in the mobile Internet market, but it also shows how seriously the company takes the threat of challenges to its formerly undisputed mastery of mobile services in China," Huang Weisong, an analyst with Capgemini, said.
Challenges to China Mobile's superiority over the mobile Internet market have come in different forms. Apple, with the release of the iPhone, staked out its battleground in the mobile Internet handset market, while Google has opted to create a handset operating system, leaving the manufacture and sale of handsets to other players. Nokia, which announced a couple of years ago that it intends to transform itself into a mobile Internet specialist, is also looking to develop its own handsets with new mobile Internet applications.
"Apple's iPhone is a great concept and product with excellent applications for mobile Internet," Huang said, adding that Apple often requires its handset to be sold in conjunction with mobile service packages, and using the high demand for the handset to force operators to fork over some of their profits from mobile services to the handset manufacturer.
Though China Mobile, arguably the biggest mobile phone operator in the world, refused to share any of its profits after multiple rounds of negotiations, Huang said that Apple's entrance into the sector still served as a wake up call for China Mobile as to the challenges lurking from handset companies.
Meanwhile, Google has obviously settled for relying on its Internet experience. "Manufacturing handsets is not [Google's] goal. The company intends to see their system [Android] become a universal operating system for all electronic devices, be they PMP, MP3 players, set-top boxes and more, to make them mobile Internet capable," Huang said.
Nokia has also held unfruitful negotiations with China Mobile over shared profits, though in this case, Nokia turned down a request by the operator to produce handsets for sale only with China Mobile service packages, Huang said. Nokia, which previously owned a48 percent share in the developer of the world's most popular smartphone operating system, Symbian, bought the remaining stake for $410 million in July this year, and promptly announced its intention to open up Symbian code to all handset makers without charge.
In comparison, China Mobile used to order customized handsets from various manufacturers based on Microsoft's Windows Mobile smart phone operating system, for which Microsoft claimed between $8 and $15 in royalties on every unit produced.
"Given these developments, it is becoming very clear that developing a proprietary handset operating system is essential for dominance of the mobile Internet market in China. The more popular your operating system is, the more applications and users you will have, and at the moment. China Mobile is in a comparatively weak position without its own operating system," Huang said.
"With its own operating system, China Mobile will be able to commission customized terminals from handset makers and keep its hand strong in negotiations over profit sharing. There is even the possibility that China Mobile may move into manufacturing handsets itself."
Interfax commentary: Mobile Internet is recognized as a key service by all Chinese telecom operators. China Mobile launched its mobile Internet strategy years ago, China Telecom is pushing its mobile Internet service brand "eSurfing," while China Unicom has also announced it will focus on mobile Internet. Google and Apple, among other IT giants, have also demonstrated their belief in the future of the mobile Internet market. However, mobile Internet is a specialized platform, very different in functionality and structure to its longer standing forebear, and success on the Internet does not guarantee success in the mobile sphere. It is also a scene of conflict, as telecom operators see themselves losing control of their mobile domain. This is why China Mobile's move to develop its own OS can be seen as an attempt to reassert and extend its dominance over the mobile Internet industry chain, making it difficult for others to get a foothold on anything other than China Mobile's terms in the future. Time will tell just how its own ambitions gel with the open source ethic of the Android system.
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