China Mobile (CHL) has reportedly launched its self-developed smartphone operating system platform today, known as the Open Mobile System (OMS). The Chinese wireless giant has also launched a line of handset models (called Ophones) based on its home-grown TD-SCDMA 3G wireless technology.

OMS is being developed by China Mobile leveraging Google’s (GOOG) open-source Android mobile operating system. This new software plaform is expected to drive the development of TD-SCDMA technology based cellular handsets.

Ophones, which operate on the OMS plaform, represents China Mobile’s response to the emerging threat from Apple Inc’s (AAPL) iPhones. The company’s biggest rival, China Unicom (CHU), has reportedly sealed a three-year agreement with Apple to exclusively market the iPhone 3G in China through subsidized price plans. This has placed China Unicom in a strong position to drive its 3G subscriber count.

In order to facilitate the development and roll-out of Ophones, China Mobile has collaborated with leading international vendors such as Dell (DELL), Philips (PHG), LG, Lenovo, HTC and Samsung. More than 20 handset manufacturers are currently helping the company to expedite the development of its propritary wireless handset.

China Mobile is aggressively investing to expand its 3G TD-SCDMA network footprint in order to achieve the 80 million subscriber target by 2011. The company plans to spend RMB 58.8 billion (US$8.6 billion) on 3G network build-outs in 2009 and RMB150 million (US$22 million) over the next two years on design and development of Ophones. China Mobile hopes Ophones to drive the commercialization and market adoption of its relatively less-mature TD-SCDMA 3G technology.

While Ophone represents a promising opportunity for China Mobile, we believe that the company will face significant challenges ahead in the domestic 3G space as China Unicom leverages its faster and widely popular 3G technology along with the iPhone opportunity to attract an elite customer base in mainland China, thereby boosting 3G market share.
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