China explores merger of carriers China Unicom, China Telecom

Visitors gather near a 5G stand of China Unicom during the Mobile World Congress in Shanghai

Visitors gather near a 5G stand of China Unicom during the Mobile World Congress in Shanghai China

A coordinated focus on 5G could push China Mobile to be more aggressive too. The state-owned Assets Supervision and Administration Commission, which oversees China's state-owned enterprises, and the Ministry of Industry and Information Technology didn't reply to queries. The escalating trade war with the United States has raised the importance of moving ahead on 5G in the country, according to the report.

The Chinese government is exploring a merger of two of the nation's top wireless carriers to speed up the development of 5G mobile services, Bloomberg reported on Tuesday, citing people familiar with the matter.

Neither China Unicom nor China Telecom responded to Bloomberg's request for comments. There has been speculation about the two companies being combined for several years. The merger is apparently being driven by the need to have one mammoth firm, instead of two or more, aggressively lead the development of 5G in China. A combination would produce a stronger challenger to the market leader, the $198 billion China Mobile.

Why it's important: The reason behind the incentive is not just the numbers, it is 5G technology.

The two carriers have a combined 600 million mobile subscribers as of July this year. This is not the first time that a merger between the two operators has been mooted, but the government has never chose to deliver on the idea.

Huawei has also been effectively frozen out of the USA market on national security grounds, while Australia has banned its telcos from procuring kit from the company. China holds a narrow lead over the US and South Korea in 5G readiness, thanks to proactive government policies and industry momentum, according to a report by research firm Analysys Mason. Huawei and ZTE, which aren't able to sell their network gear to U.S. carriers as well, have disputed they represent any such risk.

A merger between China Unicom and China Telecom would form a more formidable rival to China Mobile, which boasts more than 900 million subscribers, in the world's biggest mobile-phone market. And that's before you take into account the ongoing talk of a trade war between the U.S. and China.

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