(Reuters) – Two of China’s big three state telecom companies, China Telecom and China Unicom, are working together to build a 5G mobile network in a cost-cutting venture that could crimp orders for vendors such as Huawei Technologies.
China Telecom said last month it was ready to join rivals to build network for 5G, the fifth generation cellular network technology that promises to support new features such as autonomous driving.
China is the world’s biggest smartphone market and tie-ups between major operators there could lessen overall infrastructure spending, potentially affecting telecoms gear makers such as Huawei that are banking on the gradual rollout of 5G services.
The deal also comes as Huawei is fighting a trade ban from Washington that has hurt its business since May and could cut off its access to essential U.S. suppliers.
Countries like South Korea and the United States have already started 5G services, and China is rushing to join the race. It plans to roll out the service in more than 50 cities this year.
The companies said in separate statements on Monday that the “co-build, co-share” framework agreement signed between China Telecom and a unit of China Unicom will demarcate districts in 15 cities for the network construction.
In Beijing, Tianjin, Zhengzhou, Qingdao and Shijiazhuang, the ratio of construction districts handled by China Unicom to China Telecom will be 6:4, while that ratio will be reversed in the 10 southern cities, including Shanghai, the companies said.
The company handling a designated region will also bear the associated investment, maintenance and operating costs, they added.
China Unicom said in its statement that it believes the cooperation will help “(improve) network investment return and asset operation efficiency, leading to win-win for both parties.”
Reporting by Devika Syamnath in Bengaluru; Editing by Hugh Lawson and Jan Harvey