A 10,000-word article interprets the operators' fight for 5G: a battle of three kingdoms in financial strength

For a long time, the development of high-tech communication technologies represented by 5G has been of concern to the Chinese people.

Any little disturbance at home and abroad can attract a lot of attention.

At this critical juncture, in Fujian Province, located in the southern border of China, a small stone unexpectedly stirred up a huge wave...

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On March 12, the Fuzhou Radio Management Bureau sent a letter to Fuzhou Mobile, expressing its agreement to cancel the TD-SCDMA base station of the Fuzhou Branch of China Mobile Communications Group Fujian Co., Ltd.

For a time, there was a lot of discussion. The topic of 5G had already been hotly discussed on the Internet. Now that the storm is impending, Fuzhou City chose this time to clear the frequency and withdraw from the network and wait in vain. This move can't help but make people think about it.

However, it is just speculation, and we cannot speculate whether this move is aimed at 5G.

At present, although 5G is sweeping the world with the future trend, when it takes root, whether China will mobilize the whole country to deploy 5G like in the 3G era, industry peers may have no idea.

It is difficult to predict what will happen tomorrow, but by analyzing the history and opportunities in the past 3G and 4G construction processes, Caijing.com may be able to make some predictions about the role that operators will play in the future 5G development process.

1. Will: Policy Guidance

The Central Economic Work Conference was held in Beijing from December 19 to 21, 2018.

Wei Leping, Executive Deputy Director of the Communications Science and Technology Committee of the Ministry of Industry and Information Technology, said:

According to the capacity base station construction, 5G investment is about 1.5 times that of 4G. Overall, the national 5G investment is expected to reach 1.2 trillion yuan. The 5G investment cycle may exceed 8 years. 5G has a high frequency band, many base stations, expensive base stations, and high power consumption. Compared with 4G, investment will increase significantly, and the investment model may also change.

On January 10, Miao Wei, Minister of Industry and Information Technology, said that this year, my country will promote 5G commercialization, issue 5G temporary licenses in some regions, and conduct 5G pre-commercialization. We will strive to achieve pre-commercialization of 5G pilot projects in 2019 and ensure that 5G will be officially commercialized nationwide in 2020.

As for the 5G promotion plan of the three major operators, according to the established plan, 5G networking will be carried out in selected pilot cities, so as to achieve the third-stage trial period in 2018, enter the pre-commercial stage in 2019, and large-scale commercial use in 2020.

5G timetable of the three major operators

As for China Tower, it was listed on the Hong Kong Stock Exchange on August 8, 2018. According to the data it released, China Tower's capital expenditure in the telecommunications industry in 2016 and 2017 reached approximately 45 billion yuan and 40 billion yuan respectively, gradually becoming an important force in the business demand of the communications industry.

With the withdrawal of 3G network and the basic completion of 4G network construction, China Tower’s expenditure has been reduced significantly in 2018. However, with the deployment of 5G, China Tower’s investment will usher in a huge peak.

Every technological innovation from 2G to 3G and 3G to 4G and the continuous introduction of high-frequency spectrum have brought about a substantial increase in the number of base stations. From 2013 to 2015, the growth rates of 3G/4G base stations reached 32.93%, 95.41% and 50.70% respectively. As of September 2018, the number of 3G/4G base stations reached 4.79 million. The bank expects that 5G base stations will achieve nationwide coverage in the future, which is expected to significantly exceed the construction volume of 4G base stations. According to the current spectrum allocation plan, it is expected that the construction scale of outdoor macro stations will be no less than 5 million, which will bring China Tower a huge stock of sites with increased sharing rate and new site demand.

China Tower’s expenditure in 2018

The communications industry has always been a concentrated embodiment of the national will. Judging from the arrangements of the Ministry of Industry and Information Technology and the central government, all aspects of 5G are progressing steadily. In addition, China's telecom operators are all state-owned enterprises, and China's telecom equipment supply is basically maintained at a procurement rate of about 70%. China's 5G construction will be much less affected by external interference. Moreover, China has always had a tradition of concentrating its efforts on doing things. From the construction and investment of the 3G standard TD-SCDMA, which was like a one-shot deal, the role of national policies and state-owned enterprises in infrastructure construction can be seen. In the 4G era, China has mobilized the whole country to lay 3G/4G networks.

IMT-2020(5G) Promotion Group 8 China 5G Technology R&D Test Phase 3 Test Results

At the same time, the world's major 5G industry participants and countries have all prioritized the development and application of 5G in national or regional development. In particular, some countries have launched large-scale crackdowns on Chinese companies in order to protect their domestic 5G markets, and have even resorted to government force to exert pressure, including global lobbying and boycotts.

5G plans of major countries and regions

According to data released by GSMA, the gross output value of the mobile communications industry increased from 2.37 trillion in 2013 to 3.6 trillion US dollars in 2017, and its contribution to GDP increased from 3.6% in 2013 to 4.5% in 2017. Therefore, the generational upgrade of communication networks is also related to the economic cycle.

When the upgrade of communication technology meets the downward pressure of the economy, that is, the technology cycle is superimposed on the economic cycle, the construction of the new generation of networks will be accelerated.

Communications industry contribution to GDP

The importance of the communications industry can be seen from this. Its impact on upstream and downstream industries, equipment vendors, terminal application providers, industry practitioners, etc. is no less than any large-scale infrastructure.

In every economic cycle, infrastructure is often an important means to stimulate the market and the economy. Based on the current international situation and economic environment, the ten-year economic crisis has not retreated. It can be seen from China Tower’s expenditure in 2018 that its base station construction has fallen from the 4G high in 2016. With the promotion and application of 5G, communication infrastructure will complete new expansion under the leadership of operators.

2. License: The most important thing

On January 7, 2009, the Ministry of Industry and Information Technology issued three third-generation mobile communication (3G) licenses to China Mobile, China Telecom and China Unicom, marking China's official entry into the 3G era.

Issuance of 3G licenses

In 2014, China Tower was established with the leadership of the state and investment from the three major operators.

At this point, the three major operators will hand over their existing base stations to China Tower for management, and at the same time rent new base stations built by China Tower. The three major operators will no longer independently undertake to build base stations of their own operating standards.

China Tower Corporation's equity structure

In December 2013, China Mobile, China Unicom and China Telecom obtained TD-LET licenses, and in February 2015, China Telecom/China Unicom obtained FDD-LTE licenses.

Issuance of TD-LTE in 4G licenses

In terms of frequency bands, China Mobile has obtained 5G test frequency resources in the 2515MHz-2675MHz and 4800MHz-4900MHz bands. Among them, the 2515-2575MHz, 2635-2675MHz and 4800-4900MHz bands are newly added bands, and the 2575-2635MHz band is a re-cultivation of China Mobile's existing TD-LTE (4G) band. China Telecom has obtained 5G test frequency resources with a total bandwidth of 100MHz from 3400MHz to 3500MHz. China Unicom has obtained a total bandwidth of 100MHz from 3500 to 3600MHz for 5G trials.

From the perspective of frequency band distribution, China Telecom and China Unicom have respectively obtained 100MHz spectrum resources around 3.5GHz. These frequency bands have been supported by major global operators and a wide range of industrial chains. The frequencies used in my country's 5G technology trials are also 3.4G and 3.5G related frequency bands. It has a mature industrial chain and is regarded by the industry as the golden frequency band for 5G.

This means that China Telecom and China Unicom can greatly reduce the difficulty of 5G construction and equipment costs, and also have the support of many mature terminals, thus gaining an advantage in competing with China Mobile in the early stages of 5G.

Compared with the other two, China Mobile obtained 160MHz bandwidth resources in the 2.6GHz band (60M of which came from the re-cultivation of the existing 4G band) and 100M resource allocation in the 4.9GHz band.

In the future 5G construction, China Mobile will still be the main force.

From a global perspective, the maturity of 2.6GHz is slightly lower than that of 3.5GHz, and China Mobile will independently support the industrial chain of this frequency band. In addition, my country's 2.6GHz frequency still needs to be cleared, which may affect China Mobile's networking progress.

On December 10, 2018, the Ministry of Industry and Information Technology officially announced that it had issued 5G system low and medium frequency band experimental frequency use licenses to China Telecom, China Mobile, and China Unicom. At the same time, the Ministry of Industry and Information Technology stated that it would choose the right time to issue 5G temporary licenses to the three major operators. According to outside speculation, the 5G temporary licenses will be issued in mid-2019, and may be issued on Telecom Day on May 17. Then by 2020, a unified 5G license will be issued, and the three major operators will jointly operate a 5G network.

3. Base stations: huge investment

In 2009, the three major operators ushered in a small climax in the construction of 3G base stations. The total number of base stations built that year exceeded 260,000, and the capital expenditure directly related to 3G was about 170 billion yuan, pushing the total capital expenditure of the three major operators in 2009 to 280 billion yuan.

During the 3G base station construction cycle from 2009 to 2014, the three major operators built 1.565 million 3G base stations, driving capital expenditures of 237.5 billion yuan/year to 376.9 billion yuan/year for the three major operators, and increasing year by year from 2010 to 2014.

Among them, the most difficult are China Mobile's TD-SCDMA base stations. Since the TD network and the current G network (2G network) are not technically smoothly evolved, during the process of promoting 3G, China Mobile has to use a newly built independent networking model for all base stations. In other words, the implementation of 3G must face various difficulties such as rebuilding the network, re-selecting sites, and a long construction period. Even with the support of the Ministry of Industry and Information Technology and preferential national policies, China Mobile still lags behind China Telecom and China Unicom in the deployment of 3G networks.

In terms of terminal applications, since the TD network is not compatible with other ordinary mobile phones, this means that if ordinary users choose the TD network, they have to give up their own mobile phones and buy domestic TD models instead. This undoubtedly increases the difficulty of promoting TD; in addition, since the technology is not mature enough, the TD Internet access speed is not as stable as that of China Unicom and China Telecom in the test, which is also a huge obstacle to the development of TD.

As for China Unicom, its WCDMA is the world's mainstream 3G technology standard, with complete industrial chain support and strong suppliers, and the number of users is growing relatively fast. Therefore, it has obvious advantages over other 3G standards.

In addition, in the later evolution to 4G, the subsequent evolution of the WCDMA standard is also relatively mature and has won the support of major communication equipment manufacturers. In terms of new base stations, China Unicom has quickly opened up the market through mature technology, reasonable tariff standards, and huge terminal support. This is a very special historical opportunity in China's 3G construction.

China Telecom successfully obtained the CDMA2000 3G license after acquiring the CDMA network operated by China Unicom. However, due to the patent reasons of this network standard, its charges have always been too high, and the costs are relatively high during the promotion process. China Telecom is actually not much better than China Mobile in operating the CDMA2000 3G network.

Judging from the capital expenditure of each company, after the issuance of 3G licenses in 2009, China Telecom's capital expenditure has gradually accelerated, from 38 billion in 2009 to 80 billion in 2013; China Mobile basically maintained 125 billion to 130 billion in the first four years, and in 2013, as it further deployed 4G base stations, its capital expenditure soared to 184.9 billion; China Unicom's capital expenditure fluctuated greatly, reaching 112.5 billion in 2009, and then fluctuated between 70 billion and 100 billion.

3G base station situation (data source: China Industry Information Network)

Since the issuance of 3G licenses in January 2009, the construction of 3G base stations has driven a significant increase in capital expenditure. During the entire 3G promotion and construction process, the operator's investment cycle is about four years.

The payback period of 3G may not be that long. For example, China Mobile's 3G frequency clearance and network withdrawal took only five years from construction to application. After that, China entered the 4G era.

The investment in 3G is considered a waste of China Mobile's resources in terms of economic behavior, but in the context of national policies and construction, it is an opportunity for China to break through the world's mobile communication standards, and the impact is not small. Without the breakthrough of 3G TD-SCDMA, 4G would not have been so popular in China, and 5G would not have become part of the international standard.

On December 4, 2013, the three major domestic telecom operators were issued 4G TD-LTE licenses. On February 27, 2015, China Telecom and China Unicom were issued FDD-LTE licenses, and China entered the 4G era.

China's 4G network has gradually been consolidated from three 3G networks to two networks, of which the TD-LTE network is jointly operated by the three major operators. In other words, in principle, in places where there is a 4G TD-LTE network, the three major operators can enjoy the same network coverage. As for why China has to issue a license for the FDD-LTE network in addition to the TD-LTE network, and jointly operated by China Telecom and China Unicom, this is considered to be a kind of feedback to the 3GPP organization, as one of China's actions to accept the unified 4G network standard of 3GPP. Of course, it is also a manifestation of the openness of a major country.

After entering the 4G era, the growth of 3G base stations slowed down, and China Mobile even stopped building 3G base stations. At the same time, 4G base stations were expanded on a large scale.

2014-2016 was the peak period for 4G base station construction by the three major operators, reaching 1.02 million, 1.07 million and 1.12 million stations respectively; capital expenditures reached 376.9 billion yuan, 438.6 billion yuan and 356.2 billion yuan respectively, an increase of 16% compared with the peak period of 3G base station investment.

China Mobile has started large-scale construction and commercial use of its 4G network since 2014. Financial report data shows that from 2014 to 2017, China Mobile's 4G network investment was 80.6 billion yuan, 79.1 billion yuan, 83 billion yuan and 65.7 billion yuan respectively. The figure for 2018 is expected to be 58.5 billion yuan. In the past five years, China Mobile's investment in 4G networks has exceeded 360 billion yuan.

The total number of 4G base stations of China Unicom and China Telecom in the same period was 850,000 and 1.17 million respectively. According to this estimate, plus the cost of other supporting facilities, the construction of 4G networks by the three major operators is at least 800 billion.

China Tower Corporation was also established in 2014 with funds from the three major operators, and promoted base station sharing, and the construction of 4G base stations peaked and declined. From 2016 to 2017, the capital expenditure of the three operators showed an annual decline of 19%-13%. By 2017, the capital expenditure of the three major operators was 308.3 billion yuan.

The capital expenditure of the three major operators began to increase gradually since 2013, expanded rapidly in 2014-2015, reached its peak in 2016, and began to shrink capital expenditure in 2017.

Data source: Guosen Securities

On January 10, 2017, the "Three-Year Action Plan for the Construction of Major Information Infrastructure Projects" clearly defined four key tasks: investing 1.2 trillion yuan from 2016 to 2018 to improve the new generation of high-speed fiber-optic networks, accelerate the construction of advanced mobile broadband networks, actively build global network facilities, and strengthen application support capabilities.

Among them, the total investment in mobile broadband access network is 390.2 billion yuan, and 2 million new 4G base stations will be added by 2018. This is a major project construction and approval table for the telecommunications industry. It can be seen that the mobile broadband part is basically undertaken by the three major operators and China Tower.

Mobile 4G broadband construction project

The entire 3G and 4G base station construction saw its peak growth rate within about one year after the licenses were issued. After the 3G licenses were issued, the number of base stations increased by 135.12% year-on-year in 2009, and by 57.59% year-on-year in 2014.

After the issuance of 4G licenses, 2014 ushered in a wave of construction investment peaks. So far, the deployment of 4G base stations by the three major operators has been basically completed, the 4G user penetration rate has reached 70%, the total number of users has reached 1 billion, the number of 4G base stations has reached 3.28 million, a net increase of 652,000, and the growth rate of base station construction has gradually slowed down.

Total number of base stations and 3G/4G base stations in my country

With the allocation of 5G frequencies and the issuance of licenses, base stations will usher in a new round of construction peak. The three major operators and China Tower are still the leaders in base station deployment.

4. Networking: The dilemma of choice

MWC2018-Shanghai, which opened on June 27, 2018, marked the beginning of the competition among the three major operators for 5G applications.

China Mobile, China Southern Power Grid and Huawei jointly released the "5G Assistance for Smart Grid Application White Paper". China Mobile's 5G technology innovation started relatively early, covering multiple fields such as terminals, wireless, core, transmission, and ICT integration. At the end of 2016, 3GPP officially launched the 5G system design. China Mobile took the lead in carrying out the 5G system architecture standard project. In addition, it also led the 5G scenario and demand project and the wireless intelligent network research project. China Mobile, which has funds and users, has a great advantage in 5G investment.

China Telecom released the "China Telecom 5G Technology White Paper", which includes 5G business scenarios and main challenges, 5G network overall evolution principles and strategies, China Telecom 5G target network architecture, 4G/5G collaborative solutions, 5G network voice fallback solutions and other aspects.

China Unicom has teamed up with partners including Tencent, Baidu, Alibaba, Huawei, Ericsson, Shanghai Nokia Bell, and Intel to jointly release the "China Unicom 5G Network Slicing White Paper".

Combining the 5G timetables announced by the three major operators and the 5G-related white papers launched by their partners, we can clearly see the strength, technological accumulation, experimental development and progress of each party in 5G applications.

At the same time, it also opened up the huge 5G market. In the white papers of the three major operators, all of them talked about the 5G network architecture, that is, the form of 5G network deployment.

According to the "2018 China 5G Industry and Application Development White Paper" released by CCID Consulting, 5G will adopt the "macro station + small station" networking coverage model. Every upgrade of base stations will bring about a round of transformation of existing base stations and construction of new base stations.

In 2017, my country's 4G wide coverage phase was basically completed, with 4G base stations reaching 3.28 million. CCID Consulting predicts that the total number of 5G base stations will be 1.1-1.5 times that of 4G base stations.

Base station construction forecast

The huge market and the cost of construction have become a reflection of the operators' anxious mentality.

First of all, the 5G networking method determines the investment cost of operators.

According to the current implementation, the 5G standard network is divided into two networking modes: non-standalone (NSA) and standalone (SA).

Non-independent networking, in simple terms, is to upgrade the existing normally operating 4G or 4G LTE base stations into enhanced 4G or 4G LTE base stations, and then connect them to the 5G core network through technical upgrades:

LTE eNB -> eLTE eNB

e stands for enhanced, which is a bit awkward. It should actually be e (LTE eNB). This method is more suitable for operators who already operate large-scale 4G networks and 4G LTE networks, and can obtain 5G network support through technical upgrades at low cost.

Simple non-standalone networking mode

Independent networking means building a completely new 5G network, from base stations to equipment, all of which are newly invested and built by operators. This method is more expensive, but directly supports the existing 5G network. Of course, the technical difficulty is also greater.

5G independent networking

Among the 5G networking methods defined by 3GPP, there are 8 types of non-independent networking and 2 types of independent networking, for a total of 10 types.

3GPP 5G Networking

When operators invest in base station construction, the choice of 5G networking method determines the cost of 5G deployment.

Generally speaking, choosing non-standalone networking may be one of the cheaper methods for operators. In the 3GPP R16 stage test, the main discussion is non-standalone networking and standalone networking.

In the early stages of 3G construction, China Mobile chose to build a completely independent network that was compatible with 2G (GSM network).

Because the TD-SCDMA standard cannot be used for technical evolution of the current network, China Mobile had to choose a completely new construction method to lay the 3G network. From 2009 to 2013, before the 4G license was issued, China Mobile independently built China's 3G standard TD-SCDMA network. As for the mature WCDMA, it could be obtained through evolution from 2G.

Therefore, throughout the 3G era, China Mobile's 3G network coverage has been suppressed by China Unicom. However, China Unicom's success and failure are both due to 3G. China Unicom bet on the 3G standard, but did not expect 4G to come so quickly. When the existing base stations were incorporated into this difficult tower asset, the number of China Unicom's base stations was counted.

From the evolution of TD-LTE, under the premise that the entire 5G adopts the same standard, the three major operators will choose the non-independent networking method. On the one hand, it reuses the old 4G base stations and saves money. On the other hand, it is fast and convenient to deploy, which is conducive to quickly entering the market and grabbing users.

In the deployment of various non-independent 5G networks, 4G-5G will coexist for a long time and will be backward compatible with 3G and 2G networks. To put it simply, in the 5G network that has been upgraded through technology, 5G and 4G are together, and 5G base stations cannot function on their own.

5G non-independent networking modes that may coexist for a long time in large numbers in the future

After all, the 4G phone and text messaging functions now rely on VoLTE. China Mobile's VoLTE is relatively early, but VoLET is still not popular, and mobile calls in most areas still rely on 2G networks. For this situation, China Mobile has chosen to gradually clear the frequency and withdraw the 3G network - that is, the TD-SCDMA network. Technically, this network does not support 2G evolution, and is basically useless in the 5G era.

Telecom's 3G does not support voice services, so calls and text messages must be sent on 2G. Even though Telecom has launched VoLTE, there are still many smartphones that do not support Telecom VoLTE. Unicom has not even fully launched VoLTE, and voice and text messages must be sent on 3G, so what Unicom is doing now is to clear the frequency of Unicom's 2G network.

So for now, let alone 4G, even 2G and 3G cannot be completely withdrawn from the network at the same time by the three major operators. The networks of the three major operators all have limitations. Unless most mobile phones support VoLTE and China Unicom also fully opens VoLTE, 2G and 3G can indeed be technically withdrawn in principle. When 2G and 3G are almost withdrawn (this will be a long process), 4G will run in parallel with 5G.

From all perspectives, non-independent networking will be the main direction of base station construction for the three major operators in the future.

5. Users: Market Confusion

According to the "White Paper on China's 5G Industry and Application Development in 2018" released by CCID Consulting, the market size of China's 5G industry is expected to reach 1.15 trillion yuan by 2026, an increase of nearly 50% over the overall market size of the 4G industry.

Users have the final say. In a market worth trillions of dollars, how to attract users and provide them with a better network experience are what operators must consider now.

Data source: Guosen Securities

Operator China Mobile represents the Chinese people's obsession with wireless communications.

Unlike Europe, which began auctioning 3G spectrum after the 3G standard was announced in 2000, China's wireless communication licenses have always been controlled and issued by the government. China issued 3G licenses eight years after TD-SCDMA became the 3G standard, and issued them at the same time, taking into account the WCDMA standard dominated by Europe and the CDMA2000 standard dominated by the United States. Considering the special nature of TD-SCDMA, the Chinese government handed TD-SCDMA over to China Mobile for operation. Since then, China Mobile has shouldered the wireless communication dream of the Chinese people.

According to user data, China Mobile has more than 710 million 4G users. While 3G networks are gradually being phased out, China Mobile has not stopped building 4G or even 2G. China Mobile's "Village-to-Village" project is considered a livelihood project.

China Mobile customers

On the other hand, China Mobile holds relatively more 5G technology patents among global telecom operators.

At the "2018 GSMA Innovation Forum - 5G Smart Connection", Li Zhengmao, Vice President of China Mobile, not only announced that China Mobile's 5G patents are free, but also announced China Mobile's contribution to 5G technology. As of the end of October 2018, China Mobile has submitted nearly 1,000 invention patent applications around 5G technology, ranking among the top operators in the world. China Mobile has submitted more than 1,500 5G standardization documents in total; the document approval rate reached 41.46%, ranking fourth in the world.

Today, as TD-SCDMA is gradually being phased out, TD-LTE, which evolved from TD-SCDMA, has taken up half of the 4G market. It can be said that without China Mobile's promotion, there would be no success of TD-LTE today, and there would be no situation where China has built a 4G network with the whole country's efforts. The fact that the three major operators have jointly obtained TD-LTE licenses is indeed crucial to the development of China's 4G.

In addition, China Mobile is also leading the way in 5G deployment. On February 18, China Mobile Shanghai Branch and Huawei jointly launched the 5G network construction at Shanghai Hongqiao Railway Station and deployed a 5G digital indoor system.

Chen Li, chairman of China Mobile Shanghai, said that by the end of September this year, Shanghai will have completed the construction of no less than 5,000 5G base stations, with gigabit broadband covering 5.6 million households and 3,000 buildings, and will have built a benchmark for information infrastructure. By the end of 2020, Shanghai will have deployed 10,000 5G base stations, with mobile network access capacity reaching 1Gbps and user-perceived speeds reaching 500Mbps.

Before the issuance of temporary licenses, China Mobile has carried out field tests in five cities, including Hangzhou, Shanghai, Guangzhou, Suzhou and Wuhan. More than 100 5G base stations will be built in each city. In addition to the above five cities, China Mobile will also conduct 5G business and application demonstrations in 12 cities including Beijing, Chengdu and Shenzhen, laying a solid foundation for the commercial use of 5G.

China Unicom, in conjunction with major projects of the National Development and Reform Commission and the Ministry of Industry and Information Technology, plans to carry out pilot projects in 16 cities including Beijing, Tianjin, Qingdao, Hangzhou, Nanjing, Wuhan, Guiyang, Chengdu, Shenzhen, Fuzhou, Zhengzhou and Shenyang.

Number of China Unicom customers

Among them, the total number of 4G users reached 223 million, and the net increase in 4G users in January was 2.914 million.

At the same time, China Unicom disclosed that its capital expenditure budget for 2019 is about 58 billion yuan, of which the capital expenditure for 5G trials is expected to be around 6-8 billion yuan. The funds used for 5G construction only account for about 1/8 of the estimated expenditure in 2019, which is not a big investment.

At the same time as disclosing the use of 5G funds, China Unicom issued a tender announcement in February. On the afternoon of February 13, the announcement information on China Unicom's procurement and tendering website showed that the winning candidates for China Unicom's wireless network integration project were announced.

According to media reports, China Unicom has launched a public notice for its 416,000-station wireless network integration project, which involves 416,000 L900 and L1800 base stations, L1800 integration, software functions, and more.

China Unicom Tender Information

Does this scene look familiar?

During the transition from 3G to 4G, China Unicom issued a tender notice on September 29, 2014, stating that it would start equipment procurement for the "WCDMA 900MHz Expansion Test Project" in early October, planning to build 18,834 new U900 base stations, as well as 2G frequency conversion and service optimization. Among them, the U900 base station is China Unicom's use of the 900MHz frequency of the current 2G network GSM to carry the 3G network WCDMA. The upper bandwidth is very short, only 6M, which will compress the GSM spectrum resources. While China Mobile and China Telecom are vigorously building 4G networks, China Unicom has chosen to continue to optimize the 3G network.

Some even marveled: China Unicom optimized 3G on the eve of 4G, and missed the opportunity to continue leading in the 3G era during the development of 4G. Does it mean that it is planning to give up catching up in the 5G era by expanding 4G on a large scale on the eve of 5G?

Of course, China Unicom still cooperated with ZTE to make a 5G network call in Shenzhen, which shows that it has certain strength in 5G network carrying. It does not mean anything for this bidding and procurement.

China Telecom's pilot cities are "6+6". It will work together to promote the implementation of smart applications in the 5G era and open 5G independent networking pilot cities in Shanghai, Suzhou, Chengdu, Lanzhou, Shenzhen, Xiong'an and other places. In the future, the pilot scope will be further expanded according to the requirements of relevant state ministries and commissions, and 6 more cities will be added; China Telecom added 4.26 million mobile users, totaling 307.26 million; 4.94 million new 4G users in the month, the cumulative number of users reached 247.37 million.

In September 2018, China Telecom built the first 5G model network based on an open platform independently controlled by an operator and reached a strategic cooperation on artificial intelligence with Nokia Bell.

In December 2018, China Telecom took the lead in formulating GSMA AI terminal standards, completed the interoperability verification of 4G and 5G networks in SA networking, and successfully implemented the application of high-speed WDM-PON in 5G bearer networks;

In January 2019, China Telecom completed the 5G SA core network functional testing based on virtual machine container technology;

It also plans to launch more than 1,200 5G terminals (including mobile phones) for testing in March 2019 in preparation for its upcoming commercial use.

For the current experiments, pilots and small-scale networking, the three major operators have different focuses, but for customers, except for existing customers, the ceiling for incremental customers has gradually been reached.

How to gain customers' support for 5G under the current circumstances is the top priority for operators.

6. The future: Maybe it will really change society

China Mobile's position continues to consolidate, and the 4G standard TD-LTE, which is the evolution of the TD-SCDMA format, will continue to play a role in 5G. Since the frequency bands currently obtained by China Mobile partially overlap with those of TD-SCDMA and TD-LTE, China Mobile will adopt the method of gradually clearing the frequency and withdrawing TD-SCDMA from the network to recultivate the frequency band in order to obtain greater value. At the same time, since there is less support from the industrial chain for this frequency band, China Mobile will have to repeat the situation of pulling an industrial chain alone in the 3G era.

While China Unicom was leading in 3G, it was somewhat slow in developing 4G, resulting in it being beaten back to its original form by China Mobile in the 4G era and even being overtaken by China Telecom in a short period of time. On the eve of 5G, it was repeating the eve of 4G and carrying out large-scale upgrades or new construction of the existing network. I don't know what China Unicom will do next. In principle, it should not be short of money for 5G by carrying out mixed reform and introducing funds from Alibaba, Tencent and others. However, its investment in 5G is obviously not as enthusiastic as that of China Mobile, and is even less than that of China Telecom.

China Telecom's choice has basically been determined. The aggressive investment in 4G following China Mobile has also paid off for China Telecom. In China Telecom's current experiments and pilots, it has basically taken a synchronized pace with China Mobile. Based on its current investment in 5G, China Telecom should have big moves in the next period of time. After all, China Mobile's 5G railway station has been opened and China Unicom's 5G call has been connected.

Data source: Guosen Securities

China has built the world's largest 3G network based on the TD-SCDMA standard. In the process of evolving to 4G, the TD-LTE standard proposed by China and based on the TD-SCDMA standard has successfully become the 4G standard. Subsequently, China Mobile, China Telecom, and China Unicom all obtained TD-LTE operating licenses. One year later, considering the FDD-LTE standard in Europe and the United States, China issued FDD-LTE operating licenses to China Telecom and China Unicom.

But one year is enough to change the market landscape. Now, TD-LTE networks cover more than 60% of the market in China. China has thus become a country with a huge 4G network scale and has exported it overseas.

Today, the standard based on Huawei's Plora Code has become the channel short code standard for the 5G standard compiled by 3GPP. Huawei's 5G terminals, equipment, chips, etc. based on this standard have been shipped on a large scale. The new data shows that more than 40,000 base stations have been shipped. China's huge 4G network based on TD-LTE, whether it is an independent network or a non-independent network, can be deployed on a large scale under certain circumstances.

However, from the establishment of 3G standards to the issuance of 3G operating licenses in China, China almost waited until the TD-SCDMA industry matured before issuing the standards. Will 5G repeat the same path today?

We don't know.

Just from the current perspective:

1. Non-independent networking will become an important choice for the three major operators;

2. The investment in base station construction will be very high, after all, the base station density is much higher than that of 4G base stations;

3. The Chinese government will not easily issue licenses when the industry chain is immature;

4. The layout of operators will take into account the wishes of Europe, America and other mainstream countries, and refer to 3G licenses;

5.5G is already here.