China’s telecom industry has begun to contract for the first time, 5G orders disappointing
Chinese carriers, China Telecom and China Unicom, have reached a tentative agreement to co-build a 5G network and share network infrastructure. Further, China Mobile, China’s largest player in the telecom space, has expressed interest in joining them. According to China Unicom’s chairman Ke Ruiwen, the decision to work together and share infrastructure could results in savings of between $28 billion to $38 billion.
In addition to cutting costs, some believe the motivation behind the cooperation is weak growth in China’s telecom industry, which has begun to contract for the first time, according to MIIT figures. In fact, Chairman Fok Tung-ling of Comba Telecom Systems Holdings, a major equipment supplier to the three operators, admits that, as far as he can tell, 5G-related orders have not yet seen an increase.
The three carriers already co-own a tower company, China Tower Corp, perhaps making the monumental task of collaborating in order to build out the thousands of base stations necessary for a new 5G network in China slightly easier.
It would possible for the carriers to share only some aspects of the network. For instance, the companies could all use the same tower sites, but keep every other part of their operation separate, or the carriers could share only network equipment. However, it seems the Chinese operators intend to share nearly everything from sites to RAN, and even customers in some cases.
According to Reuters, the operators do not intend to upgrade existing cellular networks, but will instead build a stand-alone 5G network.
The possible collaboration is being met with excitement by investors who believe the decision will prop up the smaller telecoms like China Unicom by easing the concerns some have had about the company’s ability to remain financially healthy while pursuing the expensive process of building out 5G. Rocky Zhang, analyst at CCB International Securities, commented that if the company’s go through with their plan to co-build networks, “the capex required for a 5G network build [will be cut] in half.”