China has already installed about a million 5G base stations, almost 80% of the global total, and could reach 1.7 million by the end of this year, according to recently announced plans, bringing its global dominance in networks 5G will be much higher. At the moment, half a million users have a 5G network connection package, although only three-quarters have a compatible smartphone. The three state-owned operators (China Mobile, China Telecom and China Unicom) have managed to increase billing per user in the first half of the year, they have reported, and are profitable. Approximately 60% of the installed 5G networks have been awarded to Huawei, almost 30% to ZTE and the remaining 10% is shared between Ericsson, Nokia and Datang, another Chinese manufacturer.
China started commercial 5G services in October 2019, half a year later than South Korea, the United States and Switzerland, the pioneer countries, but with such determination that at the beginning of last year it already had more territory covered with 5G networks and more users Than all the rest of the world together As of mid-July, China had 961,000 5G base stations installed and 365 million connections to 5G terminals, according to official data from the Ministry of Industry and Information Technology (MIIT).
Last May, China had 819,000 5G base stations and 310 million terminals, which means that in less than two months about 150,000 new 5G base stations have been installed and more than 50 million 5G terminals connected. For comparison, in Europe there are currently around 400,000 mobile stations of all generations, from 2G to 5G.
The three Chinese mobile operators will invest 210,000 million dollars in mobile networks between 2020 and 2025, 90% of the total allocated to 5G, and only last year they allocated 35,000 million dollars to 5G networks
In the United States, the total number of stations installed is similar to that of Europe. At the end of 2020, there were 417,215 mobile cells in the United States and in two years 67,871 of this total have been installed, more than between 2011 and 2018, as highlighted by the CTIA in its annual report In a month, therefore, China has installed more 5G mobile antennas than the United States in the last two years, 4G and 5G.
China has also completed the construction of the world’s largest 5G SA network. The country’s commitment to 5G technology as the engine of China’s social, economic and industrial digital transformation is colossal. In any case, the exponential growth has taken place last year and will continue this year, but afterwards the rate of increase will logically be much slower.
China expects the number of 5G users to exceed 560 million by the end of 2023, which should represent 35% of the global total by then. There are 200 million more users in two years, a certainly impressive number, but it must be taken into account that in the last two years this figure has almost doubled. By the end of 2023, according to official forecasts, the 5G network is expected to be used by about 40% of Chinese mobile users. In addition, it is estimated that every 10,000 Chinese will have access to more than 18 5G base stations, as the official statement ensures.
The pace of installing new 5G base stations will continue to be frantic in the coming months. According to a director of the operator China Telecom, “the total number of 5G base stations in China could reach 1.7 million units by the end of this year”, as pointed out in a recent report by the consulting firm Strategy Analytics, which wonders whether It will actually be possible for China to double the number of 5G base stations in half a year.
Complement the 5G network with the 700 MHz band
At the moment, much of the Chinese 5G network operates in the 2.6 GHz mid-band, a little lower than the 3.5 GHz recommended in Europe, Japan or South Korea but which is also very suitable as compromise solution between high coverage, range, penetration and transmission speed of the mobile signal. However, this medium band will be complemented in the coming months in China with the low band of 700 MHz.
As is well known, 5G signals at 700 MHz have a much higher coverage and range than at 2.6 or 3.5 GHz and also penetrate much more inside buildings, but at the cost of a speed of much lower transmission, especially the user is very far from the mobile antenna.
China, or at least China Mobile, the world’s largest operator, with about 950 million mobile users (251 million of which are 5G, according to the company) seems to have come to the conclusion that it is 91 that and population centers relatively dense, but in the rest of the territory the low band is more indicated for reasons of efficiency and especially cost.
In the last two 5G contests, China Mobile on the one hand and on the other China Unicom and China Telecom, which share infrastructure, Huawei has achieved 60% and ZTE another 31%, with Nokia, Ericsson and Datang sharing the remaining 9%
At least, this is what emerges from a recent contest that China Mobile has called for the installation of no less than 1.74 million multiband antennas, including 700 MHz. According to information from CCTime (in Chinese but can understand a lot with Google Translator), during the remainder of the year 400,000 antennas would be installed at 700 MHz and in the first half of 2022 another 480,000 before, also at 700 MHz.
This 5G network of 1.74 million multiband antennas will be installed and managed by China Mobile but shared with China Broadcasting Network (CBN), the Chinese radio and television network that at the beginning of the year received a fourth license to provide mobile telecommunications services, mainly in the less dense areas. China Mobile will charge CBN for the use of the shared network and thus will be able to make a return on part of the investment. The other two operators, China Telecom and China Unicom, already share the entire 5G network from the beginning, a model, that of sharing the network between competitors, increasingly used.
The commissioning of a 700 MHz 5G network will mean a change in the commercialization of 5G smartphones, because they will have to be adapted to the two frequencies, the medium and the low, an issue that was not necessary for now, although the majority of 5G smartphones also work in the medium and low band (not so much in the high band, 26 GHz, because at the moment it can only be used in very dense districts of the United States).
China Unicom and China Telecom are also likely to install 700 MHz networks shortly to expand coverage in less dense areas. Technological evolution means that the loss of speed with 700 MHz is not as high as a year ago and much higher than the equivalent with 4G LTE networks at 700 MHz. To begin with, China Telecom and China Unicom have just awarded a contract for 230,000 stations base 5G for this year, which would operate in the 2.1 GHz band.
Almost entirely Chinese 5G networks
In recent weeks, there has been a lot of talk about the very low percentage of contracts won by Nokia and Ericsson in two large tenders recently failed by China Mobile on the one hand and China Unicom and China Telecom on the other. In the China Mobile contest released in mid-July, 60% of the total amount went to Huawei and non-Chinese suppliers (Nokia and Ericsson) took 5.4% of the total. Ericsson, which had won 11% in a similar China Mobile competition last year, this time got 1.9% and the remaining 3.5% Nokia.
A few days later, China Telecom and China Unicom failed another very important contest to install 5G base stations and 97% of the total was divided, in order of importance, between Huawei, ZTE and Datang Mobile. Ericsson was left with nothing because 3% went to Nokia, despite Ericsson claiming that it had submitted an offer at a lower price than Huawei.
In the end, in round numbers, Huawei has managed to keep 60% of the total amount of the contracts of the three national operators, controlled by the Government, and ZTE another 31%, as seen in the graph below from Counterpoint, based on to data from Telecoms.com. The remaining 10% is shared between Nokia, which this time has achieved a total of 4% when last year it did not even participate in the contest, Datang Mobile, a Chinese manufacturer that obtained close to 3%, and Ericsson, which had to settle for 2%, as seen in the graph.
Ericsson had already complained a few months ago about the attitude of its Swedish government, which vetoed Huawei’s participation in a public tender, because it considered that it put it at a disadvantage when it came to obtaining contracts in China. In reality, Finland also did the same and awarded most of the contracts to Nokia, but without explicitly vetoing Huawei as Sweden did.
In fact, that Huawei has obtained 60% of the total contracts in its country and ZTE another 30% falls within what has always been usual. The strange thing would have been that Ericsson or Nokia had achieved between the two more than 10%, as peculiar was that last year China Mobile granted 11% of a contract to Ericsson. At the time, the contract was mainly attributed to China Mobile wanting to have a more diversified supply offering and that it was important to know what other non-Chinese suppliers were offering. It is not ruled out either that China sought a more receptive attitude from European operators, and their respective governments, to contract Huawei link networks.
Of course, the veto on Huawei practiced by Europe and especially the United States means that neither Nokia nor Ericsson are well regarded by the three big Chinese operators. But neither have they passed any orders from Japanese to Korean suppliers and have not publicly complained as Ericsson CEO Börje Ekholm did. It is within the commercial logic to favor domestic suppliers, especially if, as many Western experts recognize, Huawei’s offer is superior to the rest in price and global quality.
The fundamental problem for Ericsson and Nokia is not that China privileges its local suppliers but that China currently represents approximately 80% of all 5G contracts in the world and will continue to do so for at least another year. In other words, if you are not in China, you cannot achieve sufficient economies of scale in the 5G equipment market.
For now, Huawei and ZTE have a sufficient market with the sale of equipment even if only in China. Clearly, Huawei wants to sell equipment in Europe, but the relative refusal of European operators is not as serious as it happens to Ericsson or Nokia, who have to compete with each other for a relatively small Western market and, on top, with powerful Korean competitors and Japanese who also want to participate in the 5G market outside their respective countries.
According to the latest data released by the three Chinese operators, China Mobile had 945.5 million mobile customers at the end of June, China Telecom 362.5 million and China Unicom with 310 million. This is a total figure, 1.610 million users, which will grow little in the coming years: China Mobile has lost 1.2 million customers while China Telecom has gained 19 and China Unicom another million.
The three operators have gained more than 50% in the last year are 5G users: China Mobile now has 251 million, China Telecom 131 million and China Unicom 113 million. The population of China is so high that, practically, there are more 5G users in China likely to connect to a 5G network (495 million between the three operators) than mobile users of all kinds in Europe or the United States.
Chinese operators will be listed in Shanghai and Hong Kong
The investment effort that the three Chinese operators have made in the last two years and that they will make in the next four is enormous. According to the GSMA’s Mobile Economy China report, the three operators, plus CBN, will invest 210,000 million dollars in mobile networks between 2020 and 2025, 90% of the total allocated to 5G, as illustrated in the graph below.
In 2020, the capex of Chinese operators was 35,000 million dollars in 5G networks, compared to 6,000 million 4G networks. For this year, the investment will be somewhat lower, about 36,000 million dollars, 31,000 million of which will go to 5G. The total amount will gradually decrease and will be “rationalized”, according to the GSMA forecast, but even so in 2025 31,000 million dollars will be invested, 28,000 million of which in 5G.
Fuente: GSMA, Mobile Economy China 2021.
The former president of the United States, Donald Trump, wanted to limit the access of Chinese companies to investors in the Wall Street stock market, which the current president Joe Biden has reinforced. In addition, it has been imposed that Chinese companies that want to list on Wall Street will have to provide more data about their companies before 2023 so that investors have more knowledge of the real state of Chinese companies.
Chinese companies have refused to disclose more financial data than is strictly necessary, as they have done so far, because they consider it to be private and completely confidential data. The US initiative has coincided in time with that promoted by the Chinese president, Xi Xin Ping, who is blocking the access of large Chinese corporations to international markets and, apart, wants to greatly restrict the access of foreign investors, especially those US investment funds, to the Chinese capital market.
The result is that the three Chinese operators, which have been listed on Wall Street for years, will shortly be listed only on the Hong Kong and Shanghai stock exchanges, as was made public at the beginning of August, as well as other large Chinese conglomerates. which were originally planned to be listed on the New York Stock Exchange. The transfer of the so-called redchips to the Chinese stock exchanges, alluding to the bluechips, as large companies that are listed on the stock market are known in the world of finance, although they are now mostly bigtech, can have wide repercussions on the stock market panorama world.
In recent months, the Asian stock markets have not performed as well as the US or European markets, but the investment flow that will lead to the massive landing of redchips remains to be seen. To begin with, China Telecom plans to make a public offer for the acquisition of shares of 54.2 billion yuan, about 8.4 billion dollars, on the Shanghai Stock Exchange, once it has left the New York Stock Exchange, where it had been listed for 19 years.
It follows in the wake of JD.com, the Chinese e-commerce giant, which was listed on Nasdaq and Hong Kong since last year, and Baidu, the Chinese “google”, which is now also listed on Kong Kong. The new Chinese stock exchange policy is affecting the valuation of other large companies, such as Alibaba or its rival Tencent, which have lost more than 12 and 17% since July 1 on the Hong Kong stock exchange. It remains to be seen what will happen this second semester.