China’s operators continue to roll out 5G base stations at a furious pace, and are expected to reach a base of 720,000 by the end of this year. However, the breakneck speed of roll-out is taking its toll on the companies’ cost base and profitability.
China Mobile issued a warning to investors last week, that its costs would rise at “relatively high rates”. The company deployed 340,000 5G base stations last year but said it was now looking to cut costs in other areas so it could continue with its expansion in 5G.
It is not just concerned by capex and deployment costs, but by some aspects of running its new network, particularly powering so many sites, some with complex Massive MIMO antenna arrays.
China’s largest operator reported a 9.5% year-on-year increase in sales in the first quarter of 2021, to RMB198.4bn ($30.6bn), and despite the 5G cost burden it managed to boost net profit by 2.3% to RMB24.1bn ($3.7bn). It said its 5G customer base had risen by 24m in the quarter to reach 189m at the end of March. Of these, however, only about half (93m) were actively using 5G services (the larger figure includes anyone with a 5G-capable contract).
The MNO plans to spend RMB183.6bn ($28.3bn) in total in 2021, up from RMB180.6bn ($27.8bn), with the expansion of 5G into more rural areas accounting for the biggest element of the increase. In its last annual report, it said that up to RMB110bn ($17bn) would be spent on 5G roll-out this year.
The next phase is likely to include wide area deployment in 700 MHz spectrum, which China Mobile can access via its sharing deal with China Broadcasting Network (CBN), the sole owner of these sub-GHz frequencies. China Mobile is expected to deploy 300,000 to 400,000 base stations in 700 MHz, and share its network with CBN. Nokia has said that, despite losing out in the most recent round of Chinese 5G RAN awards, it will take part in the bids for the next phases.