China Mobile ties HTC for OPhones.

China Mobile has reached a deal with Taiwan-based High Tech Computer (HTC) to jointly develop 3G smartphones based on TD-SCDMA 3G technology and TD-LTE, a 4G mobile broadband technology based network, in China, executives said Monday.

HTC, the world's largest maker of handsets based on Microsoft's Windows Mobile platform, will develop and supply its first 3G handset model by 2010 with six more to follow next year, Wang Jianzhou, chairman of China Mobile, told reporters at a news conference during his week-long visit in Taiwan to sign up new partners in the communications industry, including service providers and smartphone makers.

China Mobile will invest RMB47 million ($6.9 million) in the joint-venture and will provide customer service and support. This strategic collaboration will significantly help China Mobile to promote its TD-SCDMA technology in the nascent domestic 3G wireless market.

In Taiwan, Wang has met with other Taiwanese companies such as Chunghwa Telecom and MediaTek Inc, the biggest provider of mobile phone chips to China.

Moreover, China Mobile aims to acquire a 12% stake in Far EasTone Telecommunications, Taiwan's third-largest mobile-phone operator by revenue, for approximately $529 million. This strategic investment will open up an opportunity for network and technology synergies as Far EasTone also plans to develop 3G TD-SCDMA based network.

In addition to the expansion of its 3G TD-SCDMA network, China Mobile is increasingly focusing on developing 3G smartphones to counter competition from Apple Inc's iPhones.

China Mobile had held discussions with Apple about potential iPhone distribution, but these discussions broke down as the two firms could not agree on how to share the revenues.

Instead, China Mobile will make a very aggressive push to sell the 3G Ophone, planNING to subsidize these high-end handsets for customers with up to 50% off the retail price.

The launch of the OPhone by China Mobile comes as China Unicom, its closest rival, is nearing an exclusive agreement with Apple to sell the iPhone in China for three years. China Unicom is expected to offer the iPhone when it launches its country-wide 3G services this autumn.

China Unicom is hoping to use the iPhone as a powerful tool to lure some of the lucrative young mobile users from China Mobile.

China Mobile remains the largest wireless carrier in China with about 500 million subscribers. However, the company's share of the new subscribers has dropped recently due to stiff competition from China Unicom and the relatively new wireless player China Telecom as they operate more popular international 3G standard-based networks.

China Mobile is investing heavily to expand its 3G TD-SCDMA network footprint in order to achieve the 80 million subscriber target by 2011. China Mobile plans to spend RMB 58.8 billion (US$8.6 billion) on 3G network build-outs in 2009, and aims to deploy approximately 60,000 base stations across 238 cities.

The aggressive 3G deployment plan is expected to further establish China Mobile as the dominant player in the Chinese wireless market. However, the company will continue to face challenges of adaptability and performance of the TD-SCDMA technology, given the faster network speeds offered by competing technologies of its Chinese peers.