2 Telecommunications Stocks to Watch in China’s 5G Era

Mobile operators and telecommunications vendors have been scrambling to prepare themselves for the arrival of the first commercial 5G networks.

But due to the coronavirus outbreak, most 5G plans have been pushed back as lockdown measures drastically slowed down global commerce.

Yet China has taken this opportunity to reignite its domestic economy by simultaneously accelerating its nationwide rollout and deployment on both non-standalone (NSA) and standalone (SA) 5G technology.

ZTE Corp (SEHK: 763) and China Mobile Ltd (SEHK: 941) have been collaborating on several fronts on the deployment of 5G technology.

ZTE is a leading telecoms equipment and system manufacturer on integrated end-to-end innovative technology. Meanwhile, China Mobile is the largest and leading telecommunications services provider in China.

The completion of 5G infrastructure

With full support from the Chinese government, ZTE and China Mobile recently announced the completion in performance verification on one of their projects; the 5G Massive MIMO 1+X SSB platform that was tested in the central business district of Guangzhou.

In a nutshell, 5G Massive MIMO 1+X SSB platform is a technology ZTE developed that allows the massive MIMO base station antennas to direct the best path for radio signals to reach their users.

This platform provides a new three-dimensional coverage that can achieve high-quality 5G network coverage in high rise buildings and outdoor pavements.

The new technology can significantly reduce power consumption and increase efficiency as it allows more people to simultaneously connect under the network while maintaining high throughput indoors and in areas with poor coverage.

In early 2020, the two parties announced they were to build Guangzhou into a leading 5G pilot city and will carry out various research projects together.

The verification of the platform testified the capabilities of ZTE and China Mobile’s collaboration in providing a holistic 5G experience to their users.

Together, they are deemed to benefit in the long term as they continue to expand the installation of the 5G Massive MIMO 1+X SSB platform in the future.

What’s next?

Currently, China Mobile is providing non-standalone (NSA) 5G services to 50 towns and cities across China. To escalate its 5G offering, China Mobile has selected ZTE once again to deliver its standalone 5G core network to the public.

A SA 5G network essentially refers to using end-to-end 5G cells for both signaling and information transfer between devices and base stations. It deploys the new 5G Packet Core network and opt out the reliance of 4G Evolved Packet Core.

The SA 5G network brings benefits such as:

  1. Ultra-low latency that is essential for the Internet of Things (IoT) gadgets such as factory automation, or autonomous driving;
  2. Edge computing, the ability to increase network performance by reducing latency so that the travelling distance of information collected is reduced as it would under 4G network; and
  3. Networking slicing, by partitioning and isolating each physical network at an end-to-end level, it allows operators to configure and better allocate their network to specific customer use that create the optimum grouping in traffic.

Once the SA 5G core technology is completed, the project will become the world’s largest 5G SA network.

ZTE and China Mobile will be equipped with expertise and knowledge of the deployment in 5G core networks that shall sharpen their competitive edge in the telecoms industry.

The deployment of SA 5G shall also create greater possibilities for China Mobile to develop their offerings by building new businesses from new 5G use cases, and rental use of SA 5G from industry peers.

ZTE and China Mobile will continue to thrive

Although the overall development of 5G from NSA to SA will still require a more mature market, ZTE and China Mobile will continue to thrive in the long term.

With China’s government set to expedite the development of 5G networks, 2020 is the year of large-scale construction in the 5G network in China.

Together with the tight partnership between China Mobile and ZTE in the field of 5G network construction, I believe these two companies will be the core engine to drive and deploy China’s 5G plan in the next few years.