China’s second and third largest mobile operators – China Unicom and China Telecom – each expects to reduce capex by as much as CNY3 billion ($451 million) this year by jointly building 4G base stations and an optical network.
The companies announced their tie-up earlier this year, in a move that was seen as boosting their competitive position against market leader China Mobile.
China Telecom estimates it can save CNY3 billion in capex and CNY300 million in opex this year from the co-construction, while China Unicom figures it can reduce capex and opex by CNY3.3 billion this year, C114.net reported.
Both companies confirmed in their interim reports they are partnering to jointly build 60,000 4G base stations and roll out 14,500km of optical fibre.
China Telecom COO Yang Xiaowei pointed out that the two operators “are cooperating for profits, not to rival China Mobile”.
The two operators lag the market leader, which has a 62 per cent share of total mobile connections, in 4G uptake, with China Mobile accounting for 72 per cent of the country’s 4G subscribers.
As of end July, the leader had 449 million 4G subs, compared with 78 million for China Unicom and 96 million for China Telecom.
Both companies, as well as China Mobile, also lease towers from state-run China Tower. The three operators handed over much of their tower assets to China Tower last year and in early July agreed on the tower rents and pricing of related assets.
In H1 China Telecom was leasing 550,000 towers, or 55 per cent of its total, from China Tower. China Mobile leases one million towers, or 30 per cent of its total.
As major shareholders in the tower company, the three operators will benefit as China Tower becomes profitable. In the short term they expect tower usage fees to remain high due to the low co-use rate, but expect leasing fee to continue to fall as the tower sharing ratio rises.
China Telecom paid in estimated CNY15.1 billion in co-use fees in H1, while China Unicom paid CNY7.7 billion.