Huawei and ZTE win 88% of joint China Telecom/Unicom 5G tender

Apparently seeking to demonstrate even greater patriotism than their larger contemporary, the other two Chinese MNOs went big on domestic vendors for their 5G rollout.

Neither company seems to have made any formal announcement of their own, with the information originally channelled through the paywalled Shanghai Securities, then reported on by Sina Tech. We are once more indebted to our China correspondent for an accurate account of what was reported.

The long and short of it is that China Telecom and China Unicom, having decided to pool their 5G network resources last year, jointly put out a bunch of 5G RAN business for tender. Huawei and ZTE between them accounted for 88% of the business, an even greater share than they won of China Mobile’s 5G work in its recent tender. Ericsson got most of the rest, which puts it in a similar position across all three giant Chinese MNOs.

The split between Huawei and ZTE doesn’t seem to have bee published but we do know that out of the 250,000 base stations included in the tender, 110,000 will be built by China Unicom and the rest by China Telecom, at a cost of CNY 32.27 billion. Additionally, the total spending of CNY 76 billion ($10.6 billion) by all three operators equals 42% of the three operators’ total 5G CAPEX budget for the year.

Once more Nokia was totally frozen out of the process, leading some to ask whether Nokia’s 5G business may be finished (pun opportunity missed there, alas) in China. The linked piece goes on to note that things may be a lot better on the fixed line side and that may be a reason for the RAN snub. Who knows?

While the UK and EU set out their positions with respect to ‘high risk vendors’ earlier this year, the coronavirus pandemic probably means all bets are off and China knows it. It would be very surprising if this global crisis, combined with China’s stated economic expansionist ambitions, don’t result in greater restrictions on the participation of Chinese interest in foreign economies. In response China will strive to be as autonomous as possible and a global Balkanisation is the inevitable result.

5G growth isn’t enough to compensate Chinese operators’ subs loss

The total recent decline in mobile subscriptions reported by China’s mobile operators totaled 20 million and the ongoing Covid-19 pandemic isn’t the only reason.

China’s three incumbent mobile operators have reported their latest results in the last few days. The numbers do not make happy reading. Put together, the three operators lost a total of 19.5 million mobile subs in February. Here is the breakdown:

Source: company reports, Telecoms.com summary

If the trend is nothing new, as the total subs have been going down for a while, the magnitude may be a surprise. A number of factors have contributed to the fall and the size of it.

The elephant in the room is apparently the coronavirus pandemic. Since late January China’s economy, and society as a whole, has been under a hard brake. In addition to the lack of demand from migrant workers and consumers holding their purse strings more tightly in general, mobile operators, beware of their balance sheet, have been controlling their subscriber acquisition cost and have largely scaled back their marketing investment. Another possible factor related to the pandemic is that, facing weak earning prospects, operators can be more active in clearing the inactive accounts on their networks, as a means to shore up ARPU by reducing the denominator. This is a normal “trick” used by operators everywhere.

A positive angle to read the numbers is to realised that the operators’ focus of investment has shifted to 5G. This has reflected in both strong 5G growth: China Mobile has clocked up over 15 million 5G subscribers four months after launch, including 8.7 million in February alone. China Telecom has signed up 10.7 million 5G subs, including close to 3 million in February. Such shift of focus has also reflected in fast reduction of subs on legacy networks. China Mobile lost 12.5 million 4G subs and close to 11 million 2G subs. China Telecom has stopped reporting its 4G subs numbers altogether.

Another recent contributing factor to the fast reduction and slow increase of subscriptions could be related to a new policy that came into effect on 1 December 2019. Facial recognition was added on top of photo ID when a new mobile account is opened, to ensure that the one opening the account is the same person as the legal ID cardholder. Operators may have also been retrospectively taking those subs that do not meet the new requirement off their database.

In general, we can expect to see continued reduction of total subs numbers reported by the Chinese mobile operators in the near future but the size of the reduction may become less drastic, as the effect of the new policy as well as investment focus shift will become normal business operations in the months and quarters to come.

Short-term improvement is expected when the worst of the Covid-19 impact in China is coming to an end. This may come less from the expected increase in migrant workers – since domestic roaming charge was done away with in 2018, there has been a marked reduction in demand for multiple local numbers – than from economic life gradually coming back to normal. The Financial Times reported that China is going to relax the restrictions on movement in Hubei, the earlier epicentre of the pandemic.

However, there may still be some caveat. On one hand, China’s economy relies heavily on export. While Europe and North America are in the thick of battling the coronavirus with lockdown measures expanding to more places by the day, there is little prospect for China’s export-oriented enterprises to resume active business any time soon.

On the other hand, there is a question mark over how credible to official line of “zero new cases” is. Caixin, a business media outlet that prides itself for independent reporting, and is speculated to have backing from high places, reported that, Wuhan, where the virus originated, has kept finding new asymptomatic Covid-19 cases but is not recording or reporting them. Information like this may well dampen consumer confidence, however upbeat the official narrative may be.

Chinese operators lose millions of subscribers

All three of the big Chinese mobile operators are reporting significant declines in their subscriber numbers, presumably due to the current exceptional circumstances.

BNN Bloomberg has been taking a look at the numbers and reports that in the first two months of this year China Mobile lost 8 million subscribers, China telecom lost 5.6 million just in February, while China Unicom experienced a 1.2 million decline in January. One likely treason for this is extra accounts held by migrant workers for their workplace, which became redundant while they were on lockdown to prevent the spread of coronavirus.

While the numbers seem big, they need to be viewed in the context of the subscriber totals, which are in the hundreds of millions. Having said that it’s distinctly abnormal for Chinese operators to experience subscriber declines of any sort, so this is definitely significant. It seems very unlikely, however, that people will choose this time to cancel all their mobile subscriptions.

There is going to be a lot of financial hardship thanks to people being unable to work, but in a time of social distancing and self-isolation staying digitally connected to the world is more important than ever. For that reason it would be surprising to see similar declines in western markets, where the same domestic economic factors don’t apply. Having said that it is reasonable to expect some ARPU declines as everyone tightens their belts.

China Telecom celebrates the state surveillance potential of 5G

A new ad campaign by Chinese operator China Telecom promotes the enhanced spying and informing capabilities that 5G will bring.

The ad was spotted by Abacus, which notes the ad circulating on WeChat makes a virtue of how much easier it will be to spy and inform on people with 5G. Abacus asked China Telecom about the spying app featured in the ad, but was told it isn’t real and that there are no plans to develop such an app. The sole purpose of the ad was to illustrate a novel 5G use-case, they were told.

At the core of the ad are three elderly people sitting around having a chat when they spot a couple of shifty looking young men. They view them through some kind of augmented reality app on their phones, which instantly identifies them as criminals. It’s then just a matter of one click on their phone screens to report said baddies to the police.

Our Beijing correspondent reports that the final screen on the ad reads as follows: “5G, connecting all things, beating the Chaoyang Masses hands down. One-click reporting to the police.” The Chaoyang Masses are a well-known community security volunteer group based in the upmarket Chaoyang district of Beijing. They have apparently been instrumental in some fairly high-profile arrests.

Facial recognition is a big deal in China, with Beijing being at the forefront of a social credit system that promises 1984-style constant surveillance coupled with a system of incentives and punishments apparently designed to control almost every aspect of a person’s life. While there are presumably millions of CCTV cameras around the country to support this initiatives, there are many more smartphone cameras.

It’s perfectly conceivable that the social credit system will reward smartphone owners who inform on their fellow citizens, which in turn would massively increase the reach and efficiency of the surveillance state. No doubt the speed and low latency of 5G will augment this whole process, but it seems unwise for any individual telecoms company to align itself so closely to such a dystopian scheme.

China Telecom gets a piece of the Philippines new third telco

Chinese operator China Telecom has signed a $5.4 billion deal to get involved in Mislatel, the Philippines third CSP.

The other stakeholders are Udenna Corporation and Chelsea Logistics Holdings Corporation but it’s not clear how much cash each is contributing to the enterprise. The full name of the new operator is Mindanao Islamic Telephone Company but presumably it will be available to the entire population of the Philippines.

“This is a historic occasion,” said Udenna Chairman Dennis Uy. “This is another step forward in realizing Udenna’s vision to improve the lives of Filipinos. Everything that we do is about making lives better not just for this generation, but for the next generation. And that is happening here. Thank you to our partners and to all for being a part of this journey.”

Isn’t that nice? There was no quote from a China Telecom person, although apparently its Chairman Ke Ruiwen turned up to the ceremonial signing that seems to be a prerequisite to actually doing stuff in that part of the world. Presumably he is no less committed to improving the lives of successive generations of Filipinos and any strategic benefit his company achieves as a result of bankrolling infrastructure projects outside of China is entirely incidental.

The big signing took place at the second belt and road forum for international cooperation event, which is China’s big international trade strategy and an opportunity for President Xi Jinping to get his photo taken shaking hands with other politicians. A lot of it seems to involve massive foreign direct investment, so this was certainly the right place to make such an announcement. Here’s an infographic summarising what it was all about.

belt and road

Huawei powered Chinese operators trial 5G for industry verticals

China Mobile, the world’s largest mobile operator by subscribers, has just trialled 5G for business vertical use on a standalone (SA) architecture. Huawei and Baidu provided the technologies.

The trial was carried out in Beijing, China, and the use case was a corporate video conference. It used 8K cameras to capture live video, which was then sent to the 5G SA core network through China Mobile’s 5G gNodeBs base stations. The data was then processed (encoded and decoded) by Baidu servers on the same network, then sent to the conference room for the 8K live video broadcast.

The trial was using the technology called “5G Vertical LAN” defined in 3GPP R16, which in essence is an insulated “slice” of the mobile network dedicated to a single business user, i.e. becoming a private cloud for an enterprise. The enterprise cloud can be provided by the mobile operator, or the enterprise can choose to provide its own customized 5G vertical LAN. This cloudified enterprise environment “enables terminals to directly communicate with each other, and allows them to access enterprise clouds” without going through the public cloud, therefore increasing the communication security.

However, to realise such a virtual enterprise setup it needs the 5G network to be in SA mode, because insulating and managing the virtual network is all done with software and hard to implement on non-standalone (NSA) mode. This China Mobile trial was conducted on such an SA architecture.

Huawei did not disclose details of the distance between the two ends, or the latency. The company put up a live video demonstration in the last Mobile World Congress in Barcelona. In that case the distance between the video capturing point and the broadcasting point was about 2km, and the latency was 11ms. But that trial was carried over Vodafone’s hybrid network.

This is not the only network slicing trial Huawei has carried out recently. The day before, the company worked with China Telecom, the world’s largest integrated operator, and China’s State Grid, to carry out a network slicing trial to manage a live power grid. China Telecom has been vocal in promoting 5G for other vertical industries.

The commercial 5G networks launched so far, in the US and in Korea, are all on NSA architecture, which limits the use cases to primarily enhanced mobile broadband access, therefore are mainly consumer focused. When Colin Wilcock, chairman of the European Union-backed 5G Industry Association (5G-IA), dismissed the 5G leadership of North America and Korea as not real 5G but beefed up LTE, though not entirely devoid of sourgraping, he got a point. Speaking at the Smart to Future Cities conference recently, he stressed that “the 5G we (Europe) need has to support the other vertical industries”, though also he conceded it is not going to happen now, but will be deployed in two to five years’ time, reported by Compelo.

Chinese operators said to be cautious about 5G investment

Analysts are predicting an underwhelming start to 5G from its biggest market, with China’s giant operators taking a cautious approach to investment.

The Global Times reports that, between them, China Mobile, China Telecom and China Unicom will invest around $5 billion on 5G networks this year. This is apparently in line with “their pragmatic and cautious strategies”. Apparently China Telecom is dropping 9 billion yuan on 5G this year and China Unicom around 7 billion, which by the reports own assertions means China Mobile will be the big spender with 18 billion yuan.

“5G investment will last 10 years, considering the investment speed in 4G,” said some bloke called Huang, apparently. “It’s a pre-commercial time for 5G, so it’s a pre-commercial investment model.”

As you can see in the clip embedded below, another analyst echoed this perspective in a recent interview with Bloomberg. All this speculation about Chinese 5G prospects has probably been prompted by the recent announcement of China Telecom and China Mobile’s 2018 numbers. The two slides from their respective earnings presentations offer some further insight into their immediate 5G plans.

China telecom 2019 5G slide

China mobile 2019 5G slide

 

40% of the world’s population on 5G by 2025, says GSMA

GSMA’s Director General spoke at Huawei’s MBBF 2018 event, talking up the prospect and promises of 5G and artificial intelligence

Mats Granryd, the Director General of the telecom trade organisation GSMA made a keynote speech themed on “intelligent connectivity” at Huawei’s MBB 2018 event at London’s ExCel today. Granryd put spotlight on 5G and AI as the key enablers to what the telecom industry has to offer in the years to come.

In addition to predicting that 70% of the world’s population, or roughly 6 billion people will be on mobile internet, GSMA forecast 40% of the world population will be on 5G networks. When it comes to AI, on top of improving individual experience (e.g. Personal Assistants) and serving new industry needs (e.g. network slicing), Granryd highlighted what the combined AI capabilities can do for society. The GSMA’s “Big Data for Social Good” initiative has launched in seven countries around the world. Mobile operators in those markets have worked with local partners to enable air pollution warning, malaria spreading prediction, and natural disaster preparedness, using big data and machine learning and prediction capabilities.

Guiqing Liu, EVP of China Telecom, the world’s largest integrated operators in the world by subscriber number, then took the stage to share what China Telecom saw as the biggest opportunity for telecom operators to undertake the digital transformation, especially with the ascendency of industry markets. Liu included four key capabilities the industry in particular the operators need to master to succeed in the transformation. They are: end-to-end slicing to cater to different user and industry needs; FMC edge computing to deliver seamless experience; 5G+Cloud based network and services to provide flexible and special customisation; and 5G+AI to both optimise service delivery and network management.

Liu also outlined the key challenges the industry is facing before 5G can become a real commercial success. He conceded that use cases now are still very much focused on eMBB, and the industry has not thought through how to change business models in the new era, including how to bill customers for the new use cases. On network challenges, in addition to the CAPEX and OPEX and skill gap, Liu also pointed the indoor coverage weakness intrinsic of the high frequency bands most 5G networks will be built on.

Nokia gets a bunch more cash from Chinese operators

Nokia is so keen for everyone to know how well it’s doing in China that is it makes an announcement every time it wins some business.

Earlier this year we heard all about a ‘framework agreement’ signed with China mobile that was worth around €1 billion. Today Nokia has announced some more ‘frame agreements’, which are presumably the same thing and refer to a kind of pre-contract that amounts to a formal commitment to do a bunch of business in future.

This time we’re talking €2 billion, but split between all three Chinese MNOs – China Mobile, China Telecom and China Unicom. Presumably the China Mobile bit is fresh cash, not just a recycling of the previous bil. The agreements cover delivery for the next year or so of radio, fixed access, IP routing and optical transport equipment, as well as some SDN and NFV goodness. Nokia is excited by all this transitioning and leveraging.

“We are excited to continue our close collaboration with these important customers in China, to drive new levels of network performance as they transition toward 5G,” said Mike Wang, president of Nokia Shanghai Bell. “Leveraging the breadth of our end-to-end network and services capabilities, we will work closely with China Mobile, China Telecom and China Unicom to deploy technologies that meet their specific business needs.”

It wouldn’t be surprising to see some kind of equivalent announcement by Ericsson before long as the two Nordic kit vendors clearly like to compete over this sort of thing. Not long after its first China Mobile announcement Nokia said it was getting £3.5 billion from T-Mobile US to help out with 5G. Within a few weeks Ericsson had countered with an almost identical announcement of its own.

China Telecom and Liquid tie up in search for scale

China Telecom Global and Liquid Telecom have announced a new collaboration to extend their respective network coverage in the African and Asian markets.

The partnership will allow both of the telcos to offer additional network solutions and services to enterprise and wholesale customers, as well as increasing coverage across two challenging regions. China Telecom Global has already established a Point-of-Presence (PoP) at Liquid Telecom’s East Africa Data Centre in Nairobi, though this will be extended facilities in Johannesburg and Cape Town.

“With more than 50 countries in the region, Africa is nonetheless the booming new market with the highest development rate just after Asia, and a very important market for CTG,” said Changhai Liu, Managing Director of China Telecom, Africa and Middle East. “This collaboration will enable both CTG and Liquid Telecom better serve our customers and explore untapped business potential for further development. Under this partnership, we are well positioned to enhance the connectivity and network infrastructure in both regions.”

“This partnership with China Telecom Global reflects the strong global demand for world-class network services across Africa. Our combined service and network capabilities will be of great value to multinationals operating in some of the fastest growing economies across Africa and Asia-Pacific,” said Willem Marais, Group Chief Business Development Officer at Liquid Telecom.

Partnerships like this should be encouraged in regions where investments can be challenging to justify. While telcos in more developed markets can build business cases around investment in network infrastructure, the difference in economics between the developed and developing nations mean the rules are not the same. Telcos in developing nations aren’t even playing the same game, as economy of scale becomes much more difficult to realise.