China’s largest state-owned mobile carrier has turned almost entirely to homegrown telecoms vendors Huawei and ZTE to build out its next-generation 5G mobile network, which is expected to facilitate everything from instant film downloads to self-driving cars.
In recent months Beijing has repeatedly said that foreign companies are welcome to participate in the buildout of its 5G networks, while in turn pressuring other countries to allow China’s national champions to build their critical network infrastructures.
But the latest contract from state-owned carrier China Mobile shows that, at home at least, China will rely mostly on domestic companies. The Rmb37.1bn ($5.2bn) contract covers 232,143 5G base stations, the majority of the company’s targeted buildout this year.
Huawei was awarded 57.2 per cent of the contract by number of base stations, followed by ZTE with 28.7 per cent. Swedish telecoms group Ericsson, the only foreign company granted a tender, received 11.5 per cent, while a smaller Chinese company got the remaining 2.6 per cent. Finnish vendor Nokia was not awarded anything.
The outcome “is a reflection of the market reality as much as it is of the political reality”, said Hosuk Lee-Makiyama, director of the European Centre for International Political Economy, a Brussels-based think-tank. He noted that Huawei’s strong market share at home would help make up for its minimal 5G sales elsewhere.
Huawei is increasingly dependent on its home market for sales of both smartphones and telecoms infrastructure kit. In the latter it has a particular advantage since China has been working to gradually remove foreign equipment from its network, according to one analyst, who asked to remain anonymous.
Last year Huawei earned 59 per cent of its revenue from China, compared with just 35 per cent in 2010.
The race to 5G has become a focal point in the escalating tensions between the US and China, and Washington has spent much of the past year warning its allies to ban Chinese telecoms gear over fears of alleged spying. UK security officials have identified Huawei as a “high-risk vendor” but have permitted it a “limited” role in its 5G network.
China Mobile began building out its 5G network last year and allotted Ericsson and Nokia 6 per cent apiece of the first phase of its construction, according to Orient Securities. Analysts say China Mobile will account for about 50 per cent of the country’s 5G spend, with the number two and three state-owned carriers, China Unicom and China Telecom, teaming up to build another network.
“There is co-ordination between the carriers to both get better pricing and ensure purchasing doesn’t conflict with the national interest,” said Mr Lee-Makiyama.
Analysts at Jeffries noted that the price of each 5G base station came in below market expectations.
Although Huawei and ZTE have in the past used low prices to gain market share, Peter Liu, senior telecom analyst at Gartner, said that was not the case in this contract. “Ericsson is the one making slightly lower price offers, fighting for more market share. Huawei’s technology is in favour,” said Mr Liu.
China’s seven-member Politburo Standing Committee last month ordered the acceleration of new infrastructure construction, including 5G networks and data centres, as part of a stimulus plan to offset the economic impact of the coronavirus pandemic.