China Unicom confirmed on Monday that it will partner with rival China Telecom to jointly build a 5G network as the country’s carriers scale back individual investment budgets amid a slump in revenue growth.

Why it matters: While the Chinese government is calling for a quick rollout of the next-generation wireless network, the country’s big three network operators, which also includes Chinese Mobile, are seeking ways to cut costs. Telecom operators face increasing margin pressures from decelerating 4G user growth and government mandates to lower mobile phone tariffs.

  • An investment of RMB 1.23 trillion ($170 billion) is needed to build China’s 5G networks, according to securities firm China Securities International.
  • China Telecom said it would invest around RMB 9 billion in the construction of 5G networks this year, while China Unicom announced a planned investment of RMB 8 billion.
  • China Mobile raised its budget for 5G to RMB 24 billion last month, after previously allotting a 5G budget flat to last year, or around RMB 17 billion. The budget will not increase further this year, the company said.

Details: China Unicom and China Telecom will jointly build a 5G network across China in areas specified in the agreement, according to a statement (in Chinese) from China Unicom.

  • The pair will share 5G frequency bands to ensure their subscribers can access one another’s 5G networks, but their brands and businesses will remain independent, said the statement.
  • China Unicom will build 5G infrastructures in eight provinces in northern China, including Hebei, Henan, Heilongjiang, Jilin, Liaoning, Inner Mongolia, Shandong, and Shanxi, while China Mobile will be in charge of 17 provinces in the south.
  • The two carriers will co-build 5G networks in 15 major cities such as Beijing and Shanghai. The pair will separate construction responsibilities of 5G base stations based on the current number of 4G stations they operate in each city.

Context: China’s three state-owned carriers face a saturated market as their combined subscriber numbers now exceed the country’s total population at 1.6 billion in the first half.

  • The trio’s combined revenue for the first half was RMB 725 billion, down 1.2% compared with the same period last year.
  • They are racing to roll out 5G services after receiving commercial licenses in June.
  • Unlike South Korea and the US, China aims to build a more costly standalone 5G network, without using architecture from current 4G systems.

Writing about semiconductors and telecommunications.

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