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China Mobile has slashed its TD-SCDMA subscriber target for 2009 by a whopping 70%.

It originally set a goal of 10 million for the year, but signed up just about a million in the first 14 months. It is now aiming for a more practical three million target.

“The 10-million target was probably based on the three-year target of 100 million the Ministry of Industry and Information Technology (MIIT) had given China Mobile," a source from China Mobile's Shanghai subsidiary said.

Given the slow takeoff of China's homegrown TD-SCDMA 3G technology, the MIIT earlier this year cut the three-year target by half, reducing it to 50 million.

“Chinese consumers are sensitive to price. I think the current 2009 target of three million can be easily achieved if the group is willing to cut TD-SCDMA data fees,” the official said.

“Now the majority of TD-SCDMA subscribers use dongles to access the internet. They pay approximately 100 yuan ($14.64) per month. If the fee is lowered to 40 yuan, signing up subscribers will be a no-brainer. With 300 million internet users, China is a large market after all.”

However, China Mobile has shown no intention of cutting TD-SCDMA data fees in the near future for fear of losing money, he said.

Instead of going for the “no strings attached” fee cut, China Mobile has chosen to lure customers by offering free internet access that goes with netbook purchase and free phones. The carrier has reportedly earmarked 10 billion yuan ($1.46 billion) for TD-SCDMA device subsidies this year.

However, only 100,000 TD-SCDMA netbooks have been sold since they were released in April, far short of China Mobile's target.

Wang Jianzhou, president of China Mobile, told 21st Century Business Herald that there was not enough supply from netbook manufacturers and the size of the netbook market in China is limited.

Research firm Analysys International has forecast total shipments of 1.4 million carrier-customized netbooks in China this year.

Wang said that mobile phones will be the main 3G device in the future and USB dongles and netbooks are meant to give users a taste of 3G.

China Mobile's recent promotion of free TD-SCDMA phones such as the ZTE U210 and the Coolpad F69 seem to have paid off. The carrier added more than 200,000 TD-SCDMA subscribers for each of May and June.

Although given one-year head start over the other two to rollout 3G, China Mobile is the slowest among China's three telecom operators in expanding its 3G network.

According to MIIT statistics, China Telecom's cdma2000 network now covers 342 cities and China Unicom's W-CDMA network 100 cities. However, China Mobile's TD-SCDMA network only has coverage in 38 cities, and will expand to a total of 238 cities at the end of this year.

“China Mobile has been rational about its 3G investment. It has been deploying 3G networks slowly because both TD-SCDMA network equipment and mobile phones are maturing slowly,” said Will Kong, a Shanghai-based analyst with research firm iSuppli.

He noted that TD-SCDMA network equipment deployed in 2007 could not support upgrade to LTE, and China Mobile has requested vendors to replace the old equipment.

In terms of mobile phones, international giants like Nokia, Motorola and Sony Ericsson are still slow or reluctant to develop TD-SCDMA mobile phones. Motorola has launched only one TD-SCDMA mobile phone as a token of support, while Nokia and Sony Ericsson's TD-SCDMA device plans are still up in the air.