What happened behind the suspension of China Mobiles 5G base station rent-for-purchase scheme

category:Finance
 What happened behind the suspension of China Mobiles 5G base station rent-for-purchase scheme


Reporters to China Mobile Groups Public Relations Department for confirmation, as of the publication has not yet responded. After obtaining the 5G commercial license issued by the Ministry of Industry and Information Technology, operators started the 5G project. China Mobile, a telecommunications giant with a market value of trillion and revenue of 100 billion, has the largest base station scale in the world in the era of 4G. Compared with the number of 2.71 million 4G base stations in China, the 50,000 5G base stations in the initial stage of 5G are not a big project, but only this year.

On August 8, just announced China Mobiles mid-term performance, has shown its operating pressure, as well as the unopened 5G market. Considering these operating factors, the above-mentioned people said that China Mobile is ready to purchase by leasing instead of buying, and negotiate relevant matters with the main equipment supplier, and finally the two sides reached a leasing model. Consensus was reached. But even so, opinions from the national level have made China Mobile change this decision.

Base station system is the most critical infrastructure in 5G network, and also the most important part of the operatorsnetwork construction assets. It is called the lifeblood of operators in the industry. Common form is that those standing on the top of the base station tower in the streets and alleys, usually hanging a few gray square boxes.

The traditional purchasing mode of base station system is that the operators purchase base stations by tendering from the main equipment suppliers (Huawei, ZTE, Ericsson, Nokia) after pre-design, location selection and exploration, and it is a long-term process to purchase base stations in multiple rounds. For the base station purchased by rent, the property right does not belong to the operator, and the operator can pay the rent of the equipment.

Huawei Economic Observer reported that it could not respond to whether China Mobile had ever negotiated with the main equipment vendors to buy on lease instead because of its involvement in customer information. Operators have made similar attempts in small-scale purchasing, with about hundreds of sets of units for network testing, but large-scale purchasing has not yet happened, a person from China Telecom Group said in an economic observation report on July 30. Network equipment is a heavy asset, with large investment, long return cycle and fast loss elimination. Compared with direct purchase, base station leasing can save a lot of money, said Li Hao, senior analyst at the Information and Communication Industry Research Center of Saidi Consulting Co., Ltd. Taking base station leasing in the era of 4G as an example, it takes 2,400 yuan per month to lease a base station of 4G, 1,000 yuan per month for electricity and 600 yuan per year for operation and maintenance. The cost of a base station is 300,000 per station. The cost of transmission, iron tower and other costs are calculated together. The cost of each base station is about 400,000.

Li said that a base station can have antennas and equipment for more than 2, 3, 4, 5G communications, but as long as a rent is paid, obviously the rental method is more reasonable.

Meanwhile, an insider from China Unicom reported on July 30 that renting instead of buying would reduce the decline in profits caused by depreciation of large quantities of 5G equipment in the future. For example, if the investment is 10 billion yuan at a time, then the rent method can be adopted and hundreds of millions of rents can be paid every month. The cost pressure is much less.

Different perspectives

According to the above-mentioned personage of China Mobile Group, the group originally planned a phase of 50,000 5G base station projects, using the form of rent instead of purchase, and discussed related matters with the main equipment vendors, and finally the two sides reached a consensus on the rental mode.

According to the person, the decision was broken by recent comments from senior State officials. China Mobile finally decided to purchase the base stations with commercial products in accordance with the original model. He said that rent for purchase is a market behavior, the state believes that operators should consider the problem from the national point of view, hoping operators to invest as much as possible 5G.

Because 5G has the characteristics of high speed, low delay and open architecture, it can meet hundreds of millions of equipment access network, realize real interconnection of all things, and create an unprecedented scale of emerging industries.

In addition to the business outlook, at present, the 5G construction of operators will also drive a lot of investment. A base station alone contains many components such as antenna and radio frequency module. Behind each component, there are dozens or even hundreds of market participants. With the arrival of 5G, more technology integration is needed. A 5G base station, with Huawei, ZTE and other representative telecommunications equipment manufacturers standing behind, as well as a 5G industrial chain covering hundreds of companies.

At present, the whole country shows a high expectation of 5G, from the local to the capital market, are grabbing 5G. Most of the conceptual stocks in the 5G sector of the capital market are companies that have supply relations with operators or equipment manufacturers. In the past six months, their participation in 5G bidding and winning bids have been repeatedly questioned by investors.

But operators, who are both network builders and industry drivers, are facing operational challenges.

On August 7, people from China Mobile Group said that from the perspective of business operation, we do not think it is appropriate to make too much 5G investment in the second half of this year. One important reason is that China Mobile is under great pressure to operate. It has to invest 5G and 4G at the same time. It can only seek some networking modes that can guarantee quality and save cost.

On August 8, China Mobile announced its first half of 2009 earnings, with its share price falling by 5%. This trillion-dollar, 100-billion-dollar listed company had its first comparative decline in revenue and net profit in years. According to the earnings report, the companys revenue and earnings are under considerable pressure.

The growth of user traffic means expanding the existing 4G network. According to the financial report, China Mobile built 300,000 new 4G base stations in the first half of the year.

5G Market Waiting to Open

At present, operators are deploying base stations in pilot areas of dozens of cities in China. Take Beijing as an example, from along Changan Street to the West Financial Street, they have 5G network coverage. But according to the above-mentioned China Mobile Groups economic observation report, although these base stations have been laid out, they have not been powered up for some time, and the white boxes on the towers are just hanging there.

The above-mentioned people from China Mobile Group said that because there are not many 5G users this year, 5G and related standards are not ready, and the network is still mainly testing. This is also an important factor in considering rent for purchase.

According to the White Paper on Chinas 5G Industry and Application Development in 2018 issued by Saidi Consultant, 5G is still in the planning stage, and the concepts and technologies have not formed a unified standard. At the same time, the global 5G still lacks a unified industry standard, and all parties are in a fierce game to compete for the right to speak.

In June, the first batch of 5G mobile phones in China has entered the market after 5G commercial use. But Saidis consultant predicts that the penetration rate of 5G mobile phones in China will only reach 2% by next year. In May this year, Qin Fei, director of research and development of vi-vo5G, which has launched the first 5G mobile phone, said in the Economic Observation Report that sales of 5G mobile phones will not be too large this year, mainly for some fresh users. Compared with the billionaire sales of 4G mobile phones reported in Chinas mobile phone report, the 5G sales on the open platform are much smaller. At present, only ZTE Axon 10Pro5G version is officially launched in China. In terms of sales, the sales data of Jingdong as of August 9 show that there are more than 200 evaluations of this product in Jingdong, and the second round of reservations is about 55,000 people. For the Mate20X5G version of Huawei, which will be on sale on August 16, Huaweis official website, Jingdong and Tianmao have an appointment of about 610,000. Source of this article: Responsible Editor of Economic Observation Network: Zhang Mei_NF2100

In June, the first batch of 5G mobile phones in China has entered the market after 5G commercial use. But Saidis consultant predicts that the penetration rate of 5G mobile phones in China will only reach 2% by next year. In May this year, Qin Fei, director of research and development of vi-vo5G, which has launched the first 5G mobile phone, said in the Economic Observation Report that sales of 5G mobile phones will not be too large this year, mainly for some fresh users.

Compared with the billionaire sales of 4G mobile phones reported in Chinas mobile phone report, the 5G sales on the open platform are much smaller. At present, only ZTE Axon 10Pro5G version is officially launched in China. In terms of sales, the sales data of Jingdong as of August 9 show that there are more than 200 evaluations of this product in Jingdong, and the second round of reservations is about 55,000 people. For the Mate20X5G version of Huawei, which will be on sale on August 16, Huaweis official website, Jingdong and Tianmao have an appointment of about 610,000.