China Wireless Carriers Consider 5G Partnership Amidst 5G Budget Constraints in 2019

Chinese mobile operators may be soon working together to build 5G networks in order to limit the costs, the Nikkei Asian Review reportsAnd why not- all three are state owned!

China’s second- and third-ranked mobile carriers, China Telecom and China Unicom area already close to an agreement.  Number one China Mobile hasn’t commented yet.  Please see China Mobile chairman’s statement in the last paragraph below.

China Telecom Chairman and CEO Ke Ruiwen said that his company is in “deep consideration” to jointly build a 5G network with China Unicom. He confirmed that top management on both sides have already reached a “high level of consensus” on the matter and “substantial progress” has been made toward a final deal.

Co-building and co-sharing would bring great savings in capital expenditure, operating expenditure, as well as improve resource utilization,” Ke said, without revealing any numbers that might quantify the cost savings.

The 5G partnership was hinted at by China Unicom Chairman and CEO Wang Xiaochu earlier. During the company’s first-half earnings briefing, Wang floated the idea of a “co-built, co-shared” 5G infrastructure. Wang left the door open to cooperating with China Mobile and China Broadcasting Network, which were granted 5G licenses in June, but said China Unicom was “mutually complementary” with China Telecom, noting their strengths in different regions of the country.

The Chinese government hopes that developing a 5G network will help buoy the economy, but the three major mobile carriers are concerned about expenses and profits.   © AP ………………………………………………………………………………………………………..

China Telecom’s Ke also mentioned these advantages at the operator’s first-half results presentation.  Although Ke dodged questions from reporters in Hong Kong about the savings on investment and when an official agreement would be signed, he confirmed that top management on both sides have already reached a “high level of consensus” on the matter and “substantial progress” has been made toward a final deal.

Both mobile carriers are limiting their 5G investment budgets this year. China Telecom is keeping its budget unchanged from the beginning of the year at 9 billion yuan ($1.27 billion), while China Unicom is holding within the previously committed range of 8 billion yuan.

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The chief uncertainty about such a 5G mobile carrier partnership is about exactly what facilities the operators would share? Making use of the same cell towers, poles and other “passive” infrastructure would be no great leap. Through China Tower-a jointly owned telecom infrastructure business- all three mobile network operators have already pooled mobile towers to reduce costs.

China Tower is  a joint venture of the three major Chinese mobile carriers. Chairman Tong Jilu told reporters on Aug. 7 that the cell-tower builder has not changed its annual capital expenditure budget of 30 billion yuan since the beginning of the year. Tong stressed that his company’s investment “is up to the telecom operators,” adding the annual investment “would not likely exceed the budget.”

China Tower said earlier this month that it had received client demands to install 65,000 5G base stations to date, a number that it expects to rise to 100,000 by the end of the year.

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Market leader China Mobile has pledged to allocate CNY 24 billion to 5G this year, above the CNY 17 billion suggested in March. Chairman Yang Jie said that its total capital expenditure for 2019 will be under CNY 166 billion, below last year’s CNY 167.1 billion.  The company’s 5G investment this year is much smaller than the 38.7 billion yuan reported by Chinese media when 5G licenses were granted in early June. The government aims to spur job creation and support embattled equipment suppliers like Huawei and ZTE as the trade conflict with the U.S. drags on, but the carriers seem to have their own agenda.

Despite the government’s push for swift deployment of a network, Yang said “the peak period of 5G investment will be between 2020 and 2022.”  This author completing agrees with that comment with the real investment not starting till 2021 after IMT 2020 RIT/SRIT standard has been completed by ITU-R.

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References:

https://asia.nikkei.com/Spotlight/5G-networks/Chinese-mobile-carriers-eye-sharing-5G-networks-to-curb-costs

https://www.telecompaper.com/news/china-telecom-unicom-consider-5g-network-partnership–1305741

https://www.reuters.com/article/us-china-telco-5g/china-telcos-weigh-sharing-5g-network-to-cut-costs-potentially-hurting-huawei-idUSKCN1VC17X

https://www.lightreading.com/mobile/5g/chinas-5g-market-has-teething-trouble/d/d-id/753657

3 thoughts on “China Wireless Carriers Consider 5G Partnership Amidst 5G Budget Constraints in 2019

  1. China Unicom is also negotiating with China Mobile on roaming cooperation in rural areas, “so that Unicom users can enjoy the 5G service experience across the entire network,” he said.

    However, he said the company was “more inclined to build and share with China Telecom.”

    The two companies have had a cooperation agreement in place to share 4G basestations and optical networks since 2016.
    Besides offering a way to ease the eye-watering price tag of 5G rollouts, weak industry growth is a catalyst for such agreements. According to MIIT figures, China’s telecom services market has begun to contract for the first time: Total revenue for the first half shrank 0.03% year-on-year, while for June it declined 1.1%.

    Ke Ruiwen said the joint rollout and sharing should be focused on the wireless access and transmission networks, which account for more than 80% of the capex. “At the same time, the core network and the business platforms [need to] remain relatively independent in order to differentiate customer service,” he said.

    China Unicom’s Wang said the biggest advantage of the two telcos was that their allocated 5G spectrum “is very close and can improve efficiency.” Combined, Telecom and Unicom have between them 200MHz of contiguous spectrum in the 3.5GHz band, issued for 5G purposes last December.

    The sharing of resources meant faster bandwidth and more efficient use of spectrum, Wang said. The arrangement would be relatively simple, he said. The two sides would reduce cost through joint construction and maintenance while keeping their own brands and customers. Ke said the long-term goal for the two operators would be to jointly build a standalone 5G network.

    But with the specifications yet to be finalized, currently discussions were focused on issues around network sharing in non-standalone (NSA) mode. Ke confirmed that while the negotiations were underway, China Telecom would continue with its plan to deploy 40,000 5G basestations this year. He admitted there would be some overlap with Unicom, but the rollout could not stop while an agreement was reached. If the two sides struck an agreement Telecom would “make some partial adjustments to these basestations… the cost will not be especially high,” he said.
    https://www.lightreading.com/mobile/5g/china-unicom-telecom-on-course-for-5g-network-sharing/d/d-id/753700?_mc=RSS_LR_EDT

  2. ZTE has suggested it has spent roughly $900 million on R&D for the first six months of 2019, a 14.5% ratio of the total revenues for the period. This is an increase from the 12.8% share of the same period of 2018, with the new figure just ahead of the 13.8% share of revenues (estimate) Huawei allocated to R&D last year. The domestic rival has promised to increase this figure by 15-20% for 2019, though the overall percentage will not be known until the full year financial figures are known.

    In comparison, Ericsson said it attributed 18.5% of net sales revenue to R&D over the course of 2018, a figure which increased to 18.7% by the end of the first six months of 2019. At Nokia, 18.4% of net sales revenues were directed towards the R&D department for the first six months of this year.

    This part of the business has largely been focusing on the development of basic operating systems, distributed databases and core chipsets most recently. The company has completed the design and mass production of the 7nm chipsets, while it is currently undergoing the R&D phase for 5nm chipsets.

    All this work has resulted in 3,700 5G patents being granted to the firm, though this number might notably increase in the near future. ZTE has also said it is partnering with various Chinese universities to source 5,000 new employees to bolster the R&D ranks. Once again, these are numbers which are being cast into the public domain to enhance the reputation of the business at a time where vendors are facing scrutiny at an unprecedented level.

    Opened in Nanjing, Rome and Brussels, the cybersecurity centres will allow potential customers to test and validate the security credentials of the firm prior to installing any equipment or software in the network. Some will not be convinced this is a fool-proof way to ensure resilience, though it is an act of transparency which the industry and governments have been crying out for.

    The result of this work is 60 memorandums of understanding (MoU) with telcos around the world, 50 5G demonstrations in 20 industry verticals, 300 strategic collaborations and 200 5G products to date.

    It is often easy to overlook ZTE and designate the firm as a poor man’s version of 5G network infrastructure, but the numbers justify inclusion at the top table. The challenge which ZTE now faces it making prominent strides into Western markets, the very ones which are getting twitchy over security and price today.

    http://telecoms.com/499349/zte-gains-confidence-on-the-back-of-solid-earnings-growth/

  3. WSJ: In the Race to Dominate 5G, China Sprints Ahead

    Because 5G is set to be embedded in so many fields of endeavor, the country that dominates the technology is likely to reap outsize profits, attract top-tier engineering talent and seize an edge in other critical future technologies, including weaponry.

    President Trump has said 5G is a race that the U.S. must win. But while American wireless carriers are leading in early deployment of the technology, some telecom-industry leaders say Beijing is poised to vault ahead in coming months.

    While U.S. wireless carriers shuffle from city to city to introduce 5G, China plans to blanket urban areas with it by the end of next year and the rest of the country soon after. A local manager at one carrier estimated that even Tongguan, which lacks modern plumbing, could get the superfast networks by 2021.

    “We look forward to 5G,” said Wu Shengmin, Tongguan’s baby-faced village chief. His locale boasts superb service on current 4G systems that would be the envy in much of the U.S., courtesy of a nearby cellular tower nestled in a tree-covered peak.

    As it did in constructing its high-speed rail network and Olympic Games infrastructure, the Chinese government has flexed its authoritarian, top-down power to clear red tape for a 5G project that it deems a national priority. It has directed regulators, provincial and local governments and its three major state-owned wireless carriers to work together.

    In the U.S., where residents are prone to complain loudly about new cellphone towers going up next door, Washington’s strategy is far from unified. The White House hasn’t taken an important step to clear the military from valuable 5G airwaves, while measures from the Federal Communications Commission meant to fast-track 5G have actually created infighting among Washington, municipal governments and private wireless carriers, which are now suing one another.

    American officials and wireless-industry leaders say they are clearing roadblocks and that the U.S. will maintain its lead in 5G, citing projections showing that a greater proportion of Americans will use the technology compared with the Chinese in a few years.

    “Beijing can snap its fingers and put up untold cellular towers overnight, but in the long run, I have more faith in the U.S. system,” said FCC Commissioner Brendan Carr, the organization’s point person on wireless infrastructure. “Beijing is known for wasteful, debt-fueled spending on massive infrastructure projects. You don’t have to look further than some of the ghost cities across China.”

    https://www.wsj.com/articles/in-the-race-to-dominate-5g-china-has-an-edge-11567828888

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