Combined carrier would be second largest behind China Mobile

An eye on 5G leadership, Chinese authorities are considering a potential merger of China Telecom and China Unicom, two of the nation’s three mobile operators, according to a report from Bloomberg.

Citing “people familiar with the matter,” Bloomberg cautioned that while a merger proposal is under consideration, there’s no consensus.

China is a three-carrier market. China Mobile, the largest carrier in the world, has 906 mobile customers compared to 302 million for China Unicom and 282 million for China Telecom.

In comments to Bloomberg, Jefferies Hong Kong analyst Edison Lee hit on the competitive technological posture between the U.S. and China. “5G success is one of the most important goals to China and the merger is the perfect solution to what China wants to achieve. As we head into another step in the U.S.-China trade ware, we believe the State Council would be more eager to think fresh and more radically about how to accelerate 5G rollout.”

While the three Chinese operators are ostensibly competitors, they’re no stranger to coordination. China Tower was formed in 2015, when the three carriers transferred their telecom towers — worth an estimated $36 billion — to the new company. The three telcos decided to create the new entity in a move to reduce redundant construction of telecommunications infrastructure. China Mobile, China Unicom and China Telecom currently own a 38%, 28.1% and 27.9% stake respectively in China Tower. State-owned asset manager China Reform Holding owns the remaining 6%.
Earlier this year China Tower raised billions in an IPO with the goal of investing the majority of proceeds into new site construction to facilitate a more rapid 5G deployment.
On the trade front, Chinese network infrastructure vendors ZTE and Huawei have received intense scrutiny from foreign officials concerned about network security. In fact, a dispute with the U.S. led ZTE to shutdown for a time, and Huawei was recently banned by the Australian government from participating in a 5G build.

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