HONG KONG—China Telecom said on Aug. 22 it is ready to build a 5G mobile network with its rivals in order to reduce costs, a proposal that is likely to cut multi-billion dollar equipment orders for vendors such as Huawei Technologies.
China’s big three state telcos are racing to roll out 5G services in more than 50 cities this year, following countries like South Korea and the United States which have already started the service that promises to support new technologies such as autonomous driving.
While the gradual rollout of 5G services globally is a boon to telecoms gear makers, tie-ups by mobile operators in China, the world’s biggest smartphone market, to build the network together threaten to cut the size of the overall 5G infrastructure spending.
The proposal also comes as Huawei is fighting a trade ban from Washington that has hurt its business since May and could cut off its access to essential U.S. suppliers.
China Telecom Chairman Ke Ruiwen said on Thursday the company had reached a tentative agreement with rival China Unicom to jointly build a 5G network where they would share part of the infrastructure, after China Unicom expressed interest in that last week.
“Co-building and co-sharing would bring great savings in capital expenditure, operating expenditure, as well as improve resource utilization,” Ke said, without giving numbers.
China Unicom Chairman Wang Xiaochu said last week 5G network sharing could save it between 200 billion yuan to 270 billion yuan ($28.2 billion to $38.1 billion). But both companies kept their 2019 capex guidance unchanged.
Mobile operators are seeking to build networks together to share the heavy capital expenditure burden, as their earnings growth eases due to slowing subscriber growth and government pressure to cut tariffs.
Unlike South Korea and the United States, China aims to build the kind of 5G network known as stand-alone network, which is more powerful than an upgrade based on the existing 4G network but is costlier.
Both Ke and Wang said they are open to working with other players including China’s largest…