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China Telecom Collaborates With China Unicom for 5G Network

Zacks Equity Research

According to media reports, China Telecom Corporation Limited CHA has collaborated with China Unicom (Hong Kong) Limited CHU to mark its foray in the development of 5G networks across the country. The "co-build, co-share" framework agreement inked between two of the big three state telecom companies is likely to foster a congenial environment for faster deployment of 5G networks through apportioned infrastructure investments.

What’s the Fuss About 5G?

5G is billed as the technology of the future with faster download speed and seamless transfer of data. Leveraging state-of-the-art communication network architectures, 5G is touted to be the primary catalyst for next-generation IoT services. These include connected cars coupled with augmented reality and virtual reality platform, smart cities and connected devices that revolutionize key industry verticals.

Moreover, 5G is likely to augment the scalability, security and universal mobility of the telecommunications industry, which is expected to propel the wide proliferation of IoT. The telecom firms are facilitating its customers to move away from an economy-of-scale network operating model to demand-driven operations and seamlessly migrate to 5G by offering easy programmability and flexible automation.

The Strategic Partnership

The strategic partnership between China Telecom and China Unicom is expected to significantly reduce overall expenditure due to operational synergies. This, in turn, is likely to accelerate the development of 5G networks in China as it strives to match pace with the United States and South Korea that have already rolled out 5G services in select markets. Per data from the China Academy of Information and Communications Technology, China is likely to invest up to $411 billion in 5G over the next decade. The communist nation is reportedly planning to launch 5G services in 50 cities by the end of this year.

China Telecom and China Unicom have supposedly demarcated districts among themselves in 15 cities for network construction. Per the deal, the ratio of construction districts handled by China Unicom and China Telecom will be 6:4 in Beijing, Tianjin, Zhengzhou, Qingdao and Shijiazhuang, while the ratio will be reversed in the 10 southern cities, including Shanghai. Such technological collaboration is likely to serve a body blow to Huawei, which is battling stiff trade restrictions from U.S. suppliers, further crippling its order flow.

5G SIM Card

Notably, China Telecom is also actively considering plans to develop blockchain-enabled 5G SIM card in order to secure a greater pie in the market. The company has reportedly provided a blueprint of its ambitious plan that aims to develop a SIM card that will support Ethereum and ERC20 tokens — the crypto assets used for trading — and is compatible with all types of smartphones. In addition, the SIM card is likely to have superior safety features for secure transaction across 5G network, including digital identity authentication for decentralized identification and data ownership for sharing data with financial services providers.

The move would enable the company to gain additional mileage by capitalizing on the wide proliferation of crypto currency amid increased deployment of 5G technology across the globe.

The stock has declined 9.2% in the past year while the industry fell 24.4%.

Zacks Rank & Stocks to Consider

China Telecom currently has a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the broader industry are Nokia Corporation NOK and Viasat Inc. VSAT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.    

Nokia beat earnings estimates thrice in the trailing four quarters, the average positive surprise being 89.3%.  

Viasat beat earnings estimates in each of the trailing four quarters, the average positive surprise being 230.6%.

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Viasat Inc. (VSAT) : Free Stock Analysis Report
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China Unicom (Hong Kong) Ltd (CHU) : Free Stock Analysis Report
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