China Mobile is all set to take on foreign peers such as Apple, maker of the iPhone, with its own exclusive products.
Analysts said the mainland launch of multi-function handsets and the sale of mobile applications would raise the stakes for attracting and retaining users in the highly competitive 3G market.
China Mobile is expected to sell the first smart phone based on its self-developed Open Mobile System next month. It is being manufactured by Taiwan smart phone maker HTC Corp.
Meanwhile, China Unicom (Hong Kong), which operates the more internationally recognised WCDMA 3G mobile network, is still negotiating with Apple for an exclusive deal involving the iPhone.
China Mobile's new phone, Dopod G2, will have the same look as the HTC Magic selling in Hong Kong. It will be 2.75G-compatible and sell for 5,000 yuan (HK$5,684). HTC expects the 3G-compatible model to be launched by the end of the year.
The Open Mobile System phone is based on Google's Android operating system and will enable China Mobile to provide exclusive, tailor-made applications for it.
Sources said the new phone would have China Mobile's dedicated home screen with all the exclusive services, such as the Feition mobile instant message service, a mobile music station, mobile e-mail, mobile internet portal and mobile search engine.
The launch of the phone puts China Mobile on the way to establishing the country's first mobile applications store, Mobile Market, similar to the App Store operated by Apple globally.
China Mobile is expected to officially kick off the Mobile Market by the end of the year, when the company will have more smart phones supported by the country's homegrown TD-SCDMA 3G network.
Earlier this month, China Mobile said it would invest 300 million yuan to team up with various handset makers and chipmakers to develop mobile internet TD-SCDMA handsets by the end of the year.
With China Mobile establishing a close relationship with handset makers and developing its own mobile-telephone operating system, it should help boost the penetration of new value-added services for new revenue streams, said mainland-based market researcher Analysys International.
The researchers said the new operating system also helped tighten China Mobile's grip on the mobile internet supply chains, as in Japan, where operators control the handsets and content development.
Unicom chairman Chang Xiaobing said the company was still in talks with Apple about launching the iPhone in China.
Market watchers believe a deal would enable Unicom to sell the new iPhone that will be launched at Apple's Worldwide Developers Conference next month. Several Taiwan equipment manufacturers are reported to have contracts for the new iPhone products.
China Telecom Corp, which operates the CDMA 3G network, does not have plans to roll out its own operating system for handsets, although it has teamed up with Microsoft Corp to develop a customised instant message service, eSurfing Live, for its mobile and home users.
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