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China Mobile To Be Given Special Task In 5G Deployment

China is leading the race to deploy 5G, the next generation of mobile technology, with the government planning to launch a trial service by the end of this year.

Market watchers expect Beijing to announce soon the spectrum allocation plan for the three state-owned mobile operators.

They believe that the two smaller players, China Telecom and China Unicom, are set to benefit the most from the plan as they would get the frequency band being used by most operators in the world, which should bring down capital expenditure and attract more roaming usage.

Under the plan, according to mainland media, China Mobile will be allocated 300 MHz of spectrum on the 2.6GHz and 4.9GHz frequency bands, while China Unicom and China Telecom are likely to get 100 MHz of spectrum each on the 3.5GHz frequency band.

Mobile operators are expressing interest in the 3.5GHz band as it has been chosen by the International Telecommunications Union as the global 5G band for roaming. In that sense, it can be considered the most valuable spectrum band among those to be allocated by the Ministry of Industry and Information Technology, which oversees the country’s telecommunications sector, for the 5G rollout.

It should also be noted that 3.5GHz is a key mid-band spectrum which is considered a key element for 5G networks, as it can support long-distance transmission and offer high capacity for mobile traffic.

Theoretically, 5G can offer 1GHz of transmission speed at a high frequency band like 26GHz and 28GHz but transmission will be limited to a small area and will not support mobile communication. On the other hand, the 3.5GHz band can deliver data transmission speed of around 450MHz, based on several field tests.

The investment scale for 5G rollout among Chinese operators will reach 1.23 trillion yuan (US$180 billion), a 68 percent increase over that for 4G, according to an estimate by brokerage house China Securities.

As such, 5G will pose great challenges to the operators’ capital expenditures and technical capabilities.

In fact, the three major operators have not yet fully recovered their investments in the 4G era. So, in the face of the 5G innovation revolution, they have to tighten their investment as they will be pouring money into an as-yet-unproven business model.

China Telecom and China Unicom are certain to benefit from the economies of scale as the cost of new network deployment could be much lower in view of the sufficient supply of network equipment from all major vendors, given that global operators will mostly build their 5G networks on the 3.5GHz band.

In addition, both operators could secure more data roaming demand from inbound travelers since most of the 5G smartphone software to be launched by Qualcomm will most likely support the 3.5GHz band network. That should help the two smaller players to realize the earning potentials of 5G technology and cover part of the investment much earlier than China Mobile.

The decision not to allocate the global 5G band to China Mobile could be seen as a balancing act on the part of the government, as the combined revenue of the two other operators is still lagging far behind.

China Mobile’s strong financial position makes it an ideal company for the government to implement its official task, which is to establish a new 5G ecosystem running on the 2.6GHz and 4.9GHz bands.

Currently, many regions such as mainland China and Hong Kong have allocated the 2.6GHz band for 4G LTE services. If China Mobile needs to take up 2.6GHz band for 5G use, it must first clean up the band for technical migration.

China Mobile could benefit from such an arrangement since the 2.6GHz band is expected to have better coverage but may need to wait for upstream equipment supply from vendors.

However, the main challenge for China Mobile is to build the 5G network on the 4.9GHz frequency band. According to industry estimates, the cost of building base stations running on the 4.9GHz band will be 1.5 times that for base stations on the 3.5GHz band. That’s because the higher the frequency band, the more base stations are required for coverage due to the band’s shorter wavelength.

Some analysts said China Mobile is the only operator capable of building a new 5G ecosystem on new frequency bands as it can leverage on its strong financial position and huge user base. The company can convince upstream equipment vendors to add support to these two bands for 5G deployment, even though these bands are not being deployed for the purpose in overseas markets. – EJ Insight

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