China issues 5G licenses in timely boost for Huawei

SHANGHAI/HONG KONG (Reuters) - China granted 5G licenses to the country’s three major telecom operators and China Broadcasting Network Corp on Thursday, giving the go-ahead for full commercial deployment of the next-generation cellular network technology.

Employees wait for a shuttle bus at a 5G testing park at Huawei's headquarters in Shenzhen, Guangdong province, China May 29, 2019. REUTERS/Jason Lee

The approvals will trigger investment in the telecommunications sector which will benefit top vendors such as Huawei Technologies, just as the Chinese network equipment provider struggles to overcome a U.S. blacklisting that has hurt its global business.

State-owned carriers China Mobile, China Unicom and China Telecom , as well as state-owned broadcaster China Broadcasting Network Corporation Ltd, are the four licensees named by the government.

The three carriers had been granted trial 5G licenses at the end of 2018 and Thursday’s announcement gives the go ahead to begin commercial deployment ahead of the original timeline that was targeting that for 2020.

The accelerated 5G rollout could help Huawei as Washington pushes its allies around the world to drop the firm from their 5G networks due to fears it could be used as a tool of Chinese state espionage, a claim that Huawei has repeatedly denied.

Huawei said in response to the license grant that it was prepared to support China’s 5G build-out. It said it had signed 46 5G commercial contracts in 30 countries to date, shipping more than 100,000 5G base stations.

China is racing against other countries to deploy 5G on a large scale, paving the way for advances in technologies like artificial intelligence and autonomous driving.

Some analysts however believe China’s 5G rollout will face difficulties due to the U.S. ban on Huawei buying parts and components from American firms without Washington’s approval.

“We remain concerned that if the U.S. export ban on Huawei remains in place for some time, and is even extended to other Chinese tech companies, it will be very difficult for China to build 5G in scale,” Jefferies said in a note.

“The action by China to accelerate 5G licensing does not remove or alleviate this risk.”

Telecom operators in Britain, the United States and South Korea have already started offering 5G services in limited areas.

China welcomed foreign enterprises to participate in China’s 5G market, an official from the Ministry of Industry and Information Technology, which issued the licenses, said in a statement. Foreign firms likely to be interested in the rollout include Nokia and Ericsson.

China Mobile, the largest Chinese telecom operator, said it planned to offer 5G services in more than 40 Chinese cities before the end of September.

Shares in Chinese 5G-related firms such as ZTE slumped after the news, as investors pocketed gains.

(This story corrects spelling of China Telecom in the third paragraph)

Reporting by David Stanway and Josh Horwitz in Shanghai, and Sijia Jiang in Hong Kong; Editing by Stephen Coates