China Mobile has eyes only for 2.5G

China Mobile will focus on a 2.5G upgrade, before daring a leap to 3G

By CNN's Kristie Lu Stout

HONG KONG, China (CNN) -- China Mobile is shying away from third-generation mobile phone networks. Instead, it plans to offer 2.5 generation services to win users away from rival China Unicom.

Though China has a wireless market that could be the world's largest by next year, its number-one mobile operator is not in any rush to start 3G services.

Third-generation networks potentially offer streaming video, fast Internet access and CD-quality sound to users.

Both China Mobile and number-two China Unicom are intent on improving existing services before making the leap to 3G.

China Mobile cautious about 3G

China Mobile, which operates on a GSM network, commands 78 percent of the China's domestic mobile market of 100 million users.

Its present service runs on second-generation, or 2G, technology. A 2.5G upgrade would support much higher data transmission speeds.

China Mobile deputy director Lu Xiang Dong told the Xinhua news agency that China Mobile's upcoming 2.5G services would enable it to rival the CDMA technology offered by China Unicom.

"As the coming four years will still be the world of 2.5G, China Mobile will be cautious about a rapid transfer to 3G," said Lu.

Analyst Frank Yu of Ion Global told CNN that markets like China don't have a need to broaden their existing wireless penetration base by adding more services.

"They have other basic needs they want to work on before they start experimenting with prototype systems. They'll just let Japan and Korea do that."

As China Mobile upgrades to 2.5G, it will usher in a new market for 2.5G-ready handsets.

Telecom companies like Motorola, Nokia, Ericsson as well as Chinese firms ZTE and Huawei have already launched network equipment for 2.5G services, according to Xinhua.