Intelligence Brief: 5 ways to think about China Mobile’s 5G tender

With MWC19 Shanghai taking place this week, there will be no shortage of news to keep us all talking and drive forward a narrative about the industry.

If nothing else, as I called out on last week’s Data Point, China’s 5G licence grants from early in the month will be fodder for plenty of conversations – many of which will start with the question – “who is China Broadcasting and what is their 5G strategy?”

And, as those licences turn into commercial service launches and broader network rollouts, they will drive a different set of conversations. We got a hint of that last week when details of China Mobile’s new 5G core network contracts were released.

The folks at Mobile World Live covered off the story around the new MME and SAE gateway tenders, but the details around which vendors were chosen and how much of the tender they won boil down to this.

Now, to be fair, when posting the results of the tender, China Mobile called out quantities and not contract values.

Regardless, the vendor splits (Huawei winning big, others left with marginal pieces of the deal) immediately lead to a new set of questions around how Chinese operators will build their networks, who they will favour and what these selections mean for the shape of telecoms networks and vendor competition.

I know that I was asking those questions and trying my best to talk through them when connecting with operators and other colleagues over the past week. While I can’t promise any single answer, I can call out five key aspects to the deal that are worth thinking about.

You’ve Got a Friend
We all know the James Taylor song, right? The one that kicks off with: “When you’re down and troubled, and you need a helping hand. And nothing, oh nothing, is going right.” Where my friends at Mobile World Live referred to Huawei as “embattled” you could just as well see those lyrics applying to the vendor amidst the ongoing issues surrounding national security and supply chain stability concerns. Against this backdrop, awarding Huawei the bulk of a major 5G deal could be seen as part of a strategy to lend it a hand. Or, if you’re Paul Simon fan, provide a bridge over troubled waters. But why not, then, give a hand to ZTE? Perhaps because it’s less embattled. Or because Huawei’s stature makes it the national champion that carriers want to rally behind. Or maybe because the best is yet to come (more on that later). I’ve heard all of these arguments.

Buying the right gear
One problem with the “helping hand” theory is that it ignores a very real consideration for any vendor sourcing network gear – the need for capable solutions which can meet specific operator requirements. In other words, maybe Huawei won the biggest piece of the pie because it had the best solution to offer. The one that met specific China Mobile demands. We’ve heard operators lament potential limitations on their use of Huawei in 5G, in part, based on Huawei’s strong position in 5G solutions. As much as it might be tempting to frame everything about the vendor in terms of larger market themes, it would be silly to ignore basic operator network sourcing practices.

Not 5G yet
While the last two bullets tried to put the vendor selections into perspective, these last three are about the larger context. And this one is about a very simple fact: as much as we might position last week’s tender as a 5G deal, it’s not for 5G gear. It’s for 4G packet core kit. That’s because initial launches will be non-standalone (NSA), meaning the RAN will leverage a 4G core. It also means that as China Mobile moves on standalone, we might expect to go through this all again. And who knows how that will turn out?

Core versus RAN
Have you read the GSMAi report on 5G Network capex yet? No? You really should, It’s great (click here to see what I mean). One key takeaway is that between now and 2025, we’d expect that the RAN will account for more than 85% of capex. It makes sense when you think about the need for densification, the use of new spectrum bands and the ability to re-use core network capacity in NSA architectures. It also means that the core network deal we’re talking about today will likely pale in comparison to the money that will get awarded for 5G RAN going forward in follow-on tenders.

China Mobile versus everyone else
Let’s be clear: a major deal with China Mobile is something any operator would covet. But that doesn’t mean they’re the only game in town. They are one of three major operators in China and one of four launching 5G. It remains to be seen who the others will buy from. Will they follow China Mobile’s lead? Will they chart different courses, potentially driving the successes of new vendors? Will they even be so open as to make it clear what their sourcing strategies look like?

If it seems like I’ve posed more question than offered answers, that’s fair. It might be fun to conjecture on what one major 5G deal means for the shape of China’s 5G networks, but it’s far too early to tell; if 5G is a technology poised to see us into 2030, then we will likely be figuring out the shape of 5G networks and vendor positioning over many years to come.

– Peter Jarich – head of GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.