China's dash to 5G may not be quite as hectic as originally thought.
When the industry ministry unexpectedly issued 5G commercial licenses in June, it was a signal in the middle of the trade war that it was putting its foot to the floor to steal a march on rival countries.
But the operators may not have the same enthusiasm or resources.
And with the industry mired in low growth, analysts are starting to wonder how operators can sustain a national buildout that may cost more than $400 billion.
In the wake of its anemic interim results last week, China Mobile held an analysts' briefing to reassure them its total capex was largely unchanged from guidance earlier this year. (See Tough Times: SingTel, China Mobile, HKT Issue Weak Results.)
It is still committed to tipping 17.2 billion yuan ($2.4 billion) into 5G this year. But meeting this commitment could result in spending cuts elsewhere.
Previously, it said it would deploy 30,000 to 50,000 5G basestations in 2019, promising a commercial launch in 50 cities at some point in the fourth quarter.
China Telecom will invest RMB9 billion ($1.3 billion) in building 20,000 5G basestations in 40-plus cities, while China Unicom has earmarked RMB6-8 billion ($0.85-1.1 billion) to build 20,000 basestations.
China Mobile's first-half result was the first in a decade in which it recorded falls in both revenue and profit. Its stock is down 10% in the past month and 15% for the year.
The tepid industry outlook is leading analysts to look harder at the factors weighing on Chinese telcos.
One is the sheer scale of investment. Analyst firm CCID estimates the 5G rollout, with its huge small cell deployment, will cost up to three times as much as 4G, according to 21st Century Business Herald.
The government telecom research arm, the China Academy of Information and Communications Technology, has estimated total 5G investment might reach RMB2.8 trillion ($411 billion) in the period from 2020 to 2030.
Total industry capex last year was RMB287 billion ($40.8 billion), with 5G accounting for just a fraction of that amount.
While equities firm Jefferies expects this figure to rise to RMB376 billion ($53.4 billion) in 2021, it still suggests that to meet government ambitions 5G investment will have to swallow up the biggest part of capital spending budgets for the next dozen years.
There is also a problem with low retail prices, the result of a long-term government campaign to cut charges.
China now has the lowest mobile data rates of any major market of between 3 and 17 US dollar cents per month per GB. Adjusting for per capita income, that compares with rates of 24 cents in Japan and 22 cents in the US, according to figures from Jefferies.
In addition, the operators, as state-owned entities, are easily roped into various government schemes. The three have spent more than RMB40 billion on running fiber and 4G to remote villages in the last three years in support of universal service projects.
But Edison Lee, an equity research analyst at Jefferies, points out that the government and telcos may be held back by the US sanctions on Huawei.
If those last, China may not be able to build 5G on as big a scale as it intends, he said.
"That will mean more hope of lower capex for the Chinese telcos but will spell more downside risk for global communications tech supply chain.
"This could significantly set back the 5G rollout timetable of China and also globally."
— Robert Clark, contributing editor, special to Light Reading