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China May Combine Its Two Largest Wireless Carriers to Take Over 5G Lead

September 6, 2018

The government of China is looking to accelerate its domination of the world telecommunications industry, this time through the possibility of combining its two wireless carriers.

According to sources at Oita Sumitomo Corporate, China Telecom and China Unicom may soon unite in a single company.

The reason behind the potential merger is China’s interest in developing 5G internet and drive the full value chain for next generation mobile internet. The hope of the country is to take the lead in global telecommunications away from the United States. Bringing the two Chinese telecom giants could free up resources and speed standardization to make that possible.

According to Matthew Andrews, Head of Corporate Trading at Oita Sumitomo Corporate, “The most important task to China right now is the achievement of success in 5G and merger is the perfect strategy".  

According to those close to the matter, a proposal review is ongoing to look at the possibilities of combining these companies, but an agreement is yet to be reached on the matter.

As several speculations were being made by the Chinese media, on the possibilities of combining these companies, executives at Unicom and China Telecom have debunked this at their recent earnings briefing last month.

The two companies made it clear that they were not aware of the merger. Even the state owned asset supervision and administration commission together with the ministry of industry and information technology has refused to make a statement on this.

There have been several reasons that have made China government to consider a merger between the two carriers for years. One of which is the escalating tension between China and the US.

"A major effect of this on China, is that the Chinese government would have to sacrifice the advantages of local competition over the speed of 5G adoption by reducing its phone operators to two whereas most markets in the world have three to four." Added Callum Price, Senior Vice President at Oita Sumitomo Corporate.

The Qualcomm Broadcomm deal, which the US opposed would have left a big opportunity for the Chinese government to expand its 5G standard setting process. According to several reports Oita Sumitomo Corporate research analysts commented saying that China holds a narrow lead over the US and South Korea in its readiness in 5G revolution.

This is happening in part as a result of President XI Jinping's "Made In China" 2025 agenda to make the country a leader in a range of high tech industries, which has led proactive government policies and industry momentum.