By Lee Chyen Yee
HONG KONG (Reuters) - China Mobile Ltd, the world's biggest carrier, is expanding its footprint in next-generation 4G wireless technology, launching services in Hong Kong as it targets high-end Internet users to boost data revenue.
The Hong Kong launch on Friday marks a step forward in its 4G ambitions, as the carrier conducts tests aimed at launching the high-speed services in as early as two years in mainland China, the world's biggest cellphone market.
China Mobile is the only carrier in China that does not have a contract with Apple to sell iPhones, and development of its 4G technology could help pave the way for it to sell the U.S. smartphone in the country.
Even though the Beijing-based carrier has more than 660 million users - twice the U.S. population - many are low-end 2G users. China Mobile offers 3G services, but these use an inferior homegrown technology called TD-SCDMA that Apple, for instance, does not support.
Against this backdrop, China Mobile is upgrading its network as it needs to sell more smartphones to boost data revenue, which is growing more than voice revenue. China now has over a billion mobile phone users, but many just make phone calls and send text messages.
"China's income level is still low. For smartphone (usage) to pick up, China's operators will need low-cost smartphones," said Kelvin Ho, an analyst with Yuanta Securities.
"They can't totally rely on iPhones because at the end of the day, the high-end market in China may not be very large. You will have to serve the large mass market."
China Mobile, which competes with China Unicom and China Telecom Corp Ltd, is set to announce first-quarter results later on Friday. It is expected to report a net profit of 28.2 billion yuan ($4.5 billion), according to a poll of three analysts.
'ANYTIME AND ANYWHERE'
On Friday, China Mobile's Hong Kong unit launched its 4G services in the Chinese territory, allowing cross-border data sharing plans when roaming in China.
Subscribers who sign up for new 3G and 4G data plans with China Mobile in Hong Kong as of Friday will be able to travel to China to use mobile data services for a fixed monthly fee, reducing data roaming expenses, the carrier said in a statement.
"Broadband demand for accessing the Internet 'anytime and anywhere' is facing tremendous growth, corresponding with the global explosion of data," Tiger Lin, chairman of China Mobile Hong Kong, said in a statement.
"In view of this trend, 3G networks have already lagged behind the data demands of this generation."
Hong Kong has already launched next-generation 4G services with CSL Ltd, a unit of Australia's Telstra Corp, the first to do so in November 2010. China has yet to do so commercially but some cities are undergoing trial runs.
Hong Kong uses the more widely adopted FDD-LTE 4G technology, while China Mobile adopts TD-LTE, which evolves from its proprietary TD-SCDMA technology.
Fourth-generation (4G) technology has been gaining traction in some markets globally, though wide adoption is currently limited by the availability of 4G handsets.
Analysts expect more than 100 LTE commercial networks will be operational by the year-end globally, analysts said.
In Asia, since the first commercial LTE network went live in Hong Kong in November 2010, there are only a handful of operators in other countries such as Japan and Singapore that have launched commercial 4G networks.
China Mobile has conducted a first-phase trial of TD-LTE with 850 base stations in six cities, and expects to complete the next phase of tests by June next year, executives said.
A commercial launch in China would hinge on when the government issues 4G licenses, which could be two to three years away.
Shares of China Mobile were up 1 percent in afternoon trade on Friday, outperforming the main Hang Seng Index's, which was little changed.
(Editing by Chris Gallagher)