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Telecom greatest beneficiary of tower pact; China Mobile halts 2G development

30 May 2014

China Telecom has announced that it has the most to gain from a proposed infrastructure sharing deal between the nation’s three cellcos – China Mobile and China Unicom being the other two – which would see the establishment of a joint venture tower company, as it currently has the fewest towers of the trio. South China Morning Post quotes Telecom’s chairman and chief executive Wang Xiaochu as saying: ‘The establishment of the venture will avoid construction of redundant projects. China Telecom has the smallest number of towers among the three, so we will benefit most from the sharing of resources.’ The venture will be mainly responsible for operating and maintaining the mainland’s telecommunications towers and the three carriers will rent services instead of building towers of their own. China Telecom plans to spend around half of its CNY80.3 billion (USD13 billion) CAPEX in 2014 on 4G developments, but the chairman refused to comment on how the creation of the tower firm would impact its 4G spend except to note that: ‘Though it cuts spending on construction, renting of the facilities will rise.’

In related news, China Mobile has confirmed that due to the pressure of its initial investment in 4G it is halting the development of its 2G networks to concentrate on the new technology, Want China Times writes, citing Chinese-language National Business Daily. The cellco’s substantial investment in the construction of its Time Division Long Term Evolution (TD-LTE) network has seen its 4G network expand to around 260,000 base stations covering 200 cities in around six months, but has forced the operator to cut back in other areas. The cellco will cease installing new 2G base stations but says it will continue to maintain the network. Shareholders recently called into question whether the massive 4G investment would negatively impact the cellco’s financial performance, but were assured that the company is taking the long view rather than looking for short-term results.

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