Three telecom carriers create tower joint venture

Shareholding structure of the telecom tower JV Source: Compiled by GT

New firm will focus on building and operating facilities, services

China's three telecom carriers have agreed to create a joint venture to share tower facilities, a move intended to avoid repeated construction but that also raises concerns about a monopoly in telecom infrastructure, analysts said Sunday.

China Mobile, China Unicom and China Telecom jointly announced Friday the establishment of China Communications Facilities Services Corporation Limited, which will focus mainly on the construction, maintenance and operation of telecom towers and ancillary facilities, as well as the provision of outsourced services of base station equipment maintenance.

The total registered capital of the new company will be 10 billion yuan ($1.63 billion). China Mobile, the country's largest carrier by subscribers, will hold a 40 percent stake in the new firm, while China Unicom will have 30.1 percent and China Telecom 29.9 percent, the carriers said in separate statements.

The establishment of the new firm will allow the three carriers to rent services from the new firm instead of building towers themselves. Such a move could reduce redundant construction of telecom infrastructure, optimize investment efficiency and further promote resources-sharing of telecom infrastructure, according to the three carriers.

Building three separate towers will cost the three carriers a total investment of 531,000 yuan, but the cost will be reduced to 284,000 yuan if they share one tower, financial news website caixin.com reported on April 30.

The move will help China Mobile reduce its overall investment scale, utilize existing assets with higher efficiency, focus on their core operations and improve its competitiveness, China Mobile said. Its two smaller rivals also made similar remarks in their statements.

China Mobile also noted that the three parties are at a preliminary stage in considering potential injections of certain telecom assets into the new firm.

Media reports about the setting up of the joint venture have been circulating since April, with predictions that "a national base station firm" will be launched, which will stimulate reform in the monopolized telecom industry.

Analysts have played down the effect of the new company, as building and operating base stations are not included in the new firm's business scope.

"Sharing telecom towers is different from sharing base stations," Tan Yanming, senior consultant with German telecom consultancy Detecon Consulting, told the Global Times Sunday. "The latter concerns telecom operators' core assets, while the former does not."

Setting up the tower firm is in accordance with global norms, China Mobile said in the statement. In the US, for instance, there are several telecom tower firms such as American Tower Corp and Crown Castle International and SBA Communications.

China Telecom, the smallest of the three carriers, will benefit most from the establishment of the tower venture, as it has the least number of existing towers, the company's chairman Wang Xiaochu told a shareholders' meeting on May 29.

China Mobile currently owns more towers than its two smaller counterparts, but it will gradually lose the advantage after the new firm starts operation, according to Tan.

Previous media reports said the new tower firm will introduce private investment, but there was no mention of this in the statements made Friday by the three telecom firms.

"The venture's establishment is likely to cause a new monopoly in the telecom infrastructure sector," Fu -Liang, a Beijing-based independent telecom analyst, told the Global Times Sunday.

How to coordinate the relationship between the tower firm and three telecom carriers will also be a problem. "China Mobile aims to speed up the construction of 4G base stations, while it might be encumbered by the tower firm, which does not need to face the pressure from end-users," said Fu.