Telecom giants in alliance on 5G

China Unicom, China Telecom team up to accelerate rollout of the superfast tech

The joint push by China Unicom and China Telecom to build one nationwide 5G network is expected to accelerate the rollout of superfast wireless technology in the country, but its impact on upstream telecom equipment makers remains to be seen, analysts said on Tuesday.

Ma Jihua, an independent analyst who has been following the telecom industry for more than a decade, said the move will undoubtedly reduce the construction costs for 5G given the current financial pressure faced by China Unicom and China Telecom.

"It will speed up the rollout for the two companies' 5G services by cutting duplicate investment, and this will also accelerate the shipments of telecom equipment," Ma said.

The remarks came after the second and the third largest telecom operator in the country announced in a rare move on Monday their cooperation on building and sharing 5G network infrastructure.

The two companies' shares on the Hong Kong bourse jumped following the announcement.

China Unicom shares rose almost 5 percent to settle on Tuesday at its highest level in two months at HK$8.44($1.08). The shares of China Telecom also ended at a two-month peak, rising 4.74 percent to close at HK$3.76.

Under the agreements inked by the two companies, China Unicom and China Telecom will work together to build 5G networks in 15 cities, including Beijing, Tianjin, Shanghai and Nanjing in Jiangsu province, based on their total number of 4G base stations.

China Unicom will also independently build 5G networks in nine cities in Guangdong province, five cities in Zhejiang province and more cities in another eight provinces and regions. China Telecom, for its part, will build 5G networks in 10 cities of Guangdong province, five cities in Zhejiang province and cities in another 17 provinces and regions.

China International Capital Corporation Limited said in a research note the partnership between China Unicom and China Telecom will significantly relieve the financial pressure on the two companies. The acceleration of the 5G rollout will also bring benefits to telecom equipment makers such as Huawei Technologies Co and ZTE Corp.

"Currently, China Mobile, the country's largest telecom operator, has as many 4G base stations as those of China Unicom and China Telecom combined. That could also be the case in terms of 5G base stations in the future," the research note added.

Last year, the China Academy of Information and Communications Technology, a government think tank, forecast that the country's telecom carriers are expected to spend 900 billion to 1.5 trillion yuan ($127 billion to $211 billion) on 5G network construction from 2020 to 2025.

The cooperation deal though sparked worries that the total investment size on 5G will be reduced sharply since the two major players will only build one network instead of two separate networks as originally expected. If that is the case, it could be bad news for Huawei and ZTE.

Xiang Ligang, director-general of the Information Consumption Alliance, a telecom industry association, said it remains to be seen how the move will affect telecom equipment makers' businesses.