12-06-2019

China’s Ministry of Industry and Information Technology (MIIT) on 6 June granted 5G licenses for commercial use to the mainland telecom operators and the China Broadcasting network Corporation (CBN), earlier than the market expectation in the second half of this year. Before the commercial licenses, MIIT has started the 5G trails at the end of last year. The market expected the 5G services will be launched as soon as in August after the early rollout of the commercial license, but the popularity of the 5G services is limited in the short term thanks to the immature pricing and limited offer of 5G handsets. In addition, the PRC Government advocated to increase the broadband speed and lower the rates charged implying an aggressive pricing for 5G services is not recommended. On the other hand, the 5G services triggered investments in the infrastructure in advance by the telecom operators, such as tower infrastructure and network equipment. The 2019FY guidance for the aggregate 5G CAPEX by the three major carriers was RMB 300 billion; the investment amount is expected to increase amid the early rollout of the 5G commercial licenses. The infrastructure investment is therefore expected to weigh on profitability due to higher costs. On the contrary, infrastructure service providers and network equipment vendors could directly gain on the increased investment by the telecom operators and thus earning growth.

Reference:
Bloomberg, MIIT

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