Why Chinese Carriers Are Betting Big On 5G

by Trefis Team
China Mobile
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5G standards are expected to provide wireless internet speeds that are as much as 40 times as fast as 4G. Although the technology is still in its early stages, and global standards are in the process of being finalized, Chinese wireless carriers have been taking the opportunity more seriously. Mobile data adoption in China has been soaring (the country’s 4G subscriber base was up by ~55% year-over-year as of April) amid increasing digitization of the economy and also due to the government’s push to improve internet connectivity and reduce pricing as it looks to gradually shift the economy from manufacturing towards services.

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Ambitious Build Out Plans, Possibility Of A More Level Playing Field

China Mobile, the world’s largest mobile operator, announced plans conduct 5G tests this year, while noting that it could start to build out 5G networks in major cities from 2018. The carrier intends to begin full commercial deployment of 5G by 2020. Smaller rival China Unicom intends to develop 5G technologies jointly with Qualcomm. 5G networks are very capital intensive, as they operate on the so-called millimeter spectrum (typically 3 GHz to 5 GHz spectrum bands), which require greater frequency reuse and more base stations to provide the same level of coverage as 4G. Per some estimates, the three Chinese telecom operators are forecast to spend up to $180 billion over a seven-year period on their 5G build-outs, compared to about $117 billion invested in the 4G mobile technology cycle between 2013 to 2020. All three carriers are already active in the wireline broadband space, with increasing fiber optic cable footprints, and this could serve as a back haul for their 5G networks. China’s home grown network equipment provider Huawei is also investing heavily in its 5G research and patent development-related efforts, and there is a possibility that this could help Chinese companies with their technology deployment.

There are some signs that China could be moving towards a more market-based model for telecom services. For example, last year the country revised its spectrum policy, potentially allowing the country’s 5G airwaves to be sold via a market-based approach (such as auctions), instead of the typical administrative approval that was used historically. This could bring about a more level playing field, unlike the 4G deployment cycle, where China Unicom and China Telecom were awarded full licenses over a year later than China Mobile.

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