Three state-run telecom operators of China have established a
joint venture company named China Communications Facilities
Services to share telecom infrastructure and reduce their related
The newly formed company has a registered capital of 10 billion
yuan ($1.6 billion) with the world's largest wireless carrier in
terms of subscriber base -
China Mobile Limited
) - holding a majority 40% stake. Meanwhile,
China Unicom Hong Kong Limited
) will have a 30.1% stake, while
China Telecom Corp. Limited
) will hold the remaining 29.9%.
China Communications Facilities Services will focus on
construction, maintenance and operations of wireless towers apart
from providing power and air conditioning for base stations.
Additionally, the company will also outsource maintenance services
of base station equipment to third party vendors. The three
operators are currently mulling over the respective tower assets
which they will contribute to the joint venture to make it a
The project dates back to April 2014 when the three companies
had declared their plans to set up an infrastructure-sharing joint
venture in a bid to reduce costs, but at the same time, ramp up the
efficiency of rolling out their individual networks.
Notably, the three Chinese operators won the LTE-TDD license in
Dec 2013 and since then have launched their services in different
parts of the country. However, China Mobile secured a competitive
edge in 4G owing to the compatibility of its 3G standard (Time
Division Synchronous Code Division Multiple Access or TDSCDMA) with
To curb China Mobile's dominance, China Unicom and China Telecom
are undergoing a hybrid network trial by integrating both the
TDD-LTE (Time Division Duplex) and FDD-LTE (Frequency Division
Duplex) Standards in 16 different cities in the mainland.
According to the telecom giant trio, the tower sharing deal will
reduce unnecessary construction of towers. We believe apart from
controlling costs, it will also allow faster roll out of
Further, the advent of free messaging apps has taken a toll on
the carriers' income from text and voice services, resulting in
declining revenues. In this regard, the new joint venture can prove
instrumental in giving a new lease of life to the company's top
line, at least to some extent.
China Mobile holds a Zacks Rank #4 (Sell), while China Unicom
and China Telecom currently carry a Zacks Rank #5 (Strong Sell). A
Zacks Rank #1 (Strong Buy) stock worth considering within this
Shenandoah Telecommunications Co.
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