Trump's trade war is causing China to consider merging 2 of its biggest mobile-phone carriers

  • China is considering merging China Telecom and China Unicom, two of its biggest mobile-phone carriers, according to Bloomberg.
  • A merger would leave the country’s telecommunication industry with two mega carriers, CT/Unicom unit and China Mobile, allowing both to aggressively pursue 5G technology.
  • This allocation is prompted by an escalating competition in 5G technology amid an escalating trade war between the US and China.

An escalating trade war is prompting China to consider merging two of its biggest mobile-phone carriers to dominate competition over US in 5G, the next-generation of high-speed wireless technology, according to Jefferies analysts.

Top Chinese leaders are reviewing a proposal to combine China Telecom (CT) and China Unicom, two of the country’s three state-owned wireless carries, Bloomberg reported on Tuesday, citing sources familiar with the matter. China Telecom and China Unicom accounted for 19% and 20% of the 1.49 billion mobile phone users market in China, while rival China Mobile dominates 61% of the market’s share.

This government allocation is “not a surprise” in the eyes of Jefferies analyst Edison Lee.

“5G success is one of the most important goals to China; and merging CT and Unicom is the cleanest solution,” Lee said in a note sent out to clients on Tuesday.

“As we head into another step- up in the US-China trade war (ie, tariff on $billion of Chinese exports to the US), we believe the State Council would be more eager to think fresh and more radically about how to accelerate 5G rollout.”

Lee estimates that a combination will leave the country’s telecommunication industry two mega carriers, CT/Unicom and China Mobile, and allocate them different spectrum to allow both to aggressively develop 5G technology.

“Under a merged CT/Unicom (T/U) scenario, T/U and CM will both be allocated the following: 1) 100MHz of contiguous spectrum at 3.5GHz, 2) 100MHz of contiguous spectrum at 4.9GHz, and 3) 50MHz of contiguous spectrum at 3.3GHz for indoor coverage,” Lee said.

“In addition, the government may allocate 60MHz of contiguous spectrum at 2.6GHz to T/U (below CM’s current allocation), and 40MHz (above CM’s current allocation) to CM so that CM can combine it with its existing 4G spectrum of 60MHz. That means CM will have 100MHz spectrum at 2.6GHz to deploy, more than T/U’s 60MHz.”

Fifth-generation, or 5G, connectivity has been one of the core competitions between the two countries. The US is pursuing a comprehensive wireless strategy to ensure that the nation will lead the world in the deployment of next-generation wireless technologies, according to Federal Communications Commission, who said 5G technology could be up to 100 times faster than current 4G service.

Under the initiative “Leading the World Toward a 5G Future,” the FCC makes additional forward-thinking spectrum available for 5G services, builds infrastructure to support the data intensive uses, and relaxes regulatory barriers to encourage 5G networks investment.

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