China telcos consider 5G network sharing
As earnings season reaches a crescendo, wireless carrier China Telecom (NYSE:CHA) is raising an old theme by saying it might consider sharing resources with someone else in building a next-generation 5G network. This particular topic first surfaced more than a year ago when China Telecom and rival Unicom (NYSE:CHU) studied the possibility of sharing 4G resources, even though they ultimately each built their own networks. (previous post)
The interesting twist this time is that Beijing is rolling out a program to inject private capital into the telecoms sector, meaning perhaps China Telecom and the other telcos could be allowed to pick private sector partners for their 5G networks. Another interesting wrinkle comes in the form of a fourth state-run telco that was assembled from the nation’s many cable TV companies last year and would probably like to have its own telecoms network.
The bigger backdrop behind this is that China’s telecoms services sector is becoming increasingly competitive, as the regulator allows more players into the market in a bid to make it more dynamic. The private sector is getting involved through a virtual network operator (VNO) program that allows companies to lease network capacity from the big three carriers and resell it under their own brands. Meantime, a fourth major carrier, China Broadband Network Co., made its official launch last year through the ongoing consolidation of the nation’s many regional cable TV operators.
All of that, combined with the huge costs of building the current generation of 4G networks, is putting huge pressure on all three of China’s big state-run telcos, which are feeling the pain on their bottom line. Unicom has felt it the worst, reporting its profit tumbled 94 percent last year, while China Telecom’s profit fell by a milder 10 percent. The biggest carrier, China Mobile (NYSE:CHL), will report its 2016 results later today.
Against that backdrop, let’s…