Chinese Big Three sell infrastructure to China Tower

The three major Chinese operators have signed deals to sell their tower infrastructure to China Tower, a venture that the firms set up last year for this specific purpose.

The creation of a tower firm avoids the need for redundant infrastructure build-outs among the 3 state-owned operators, allowing them to share space on towers. The combined tower assets of all 3 operators are valued at around CNY230 billion ($36 billion).

China Tower will in turn provide the operators with shares and cash by way of compensation, with shares valued at CNY1 each. Market leader China Mobile will take a 38% stake with a maximum of around 5.1 billion shares. China Unicom will receive a holding of 28.1% along with 37.74 billion shares, while China Telecom will have an interest of 27.9% and 37.47 billion shares.

The remaining 6% stake will be held by China Reform Holding Company under the authority of China’s Assets Supervision and Administration Commission. The firm will pay cash for the holding.

Each of the state owned operators issued a separate statement confirming that the terms of agreement with China Tower are being finalised. The operators are allowed to use their former assets to continue providing coverage until a lease deal has been agreed, thereby avoiding any service outages.

Once the deal closes, China Tower has 30 days to make initial payments of CNY5 billion and CNY3 billion respectively to China Mobile and China Unicom. The tower firm then has until then end of 2017 to make follow up payments to both firms.

Founded in July 2014, China Tower took control of almost 1 million towers from the Chinese Big Three in August this year. The plan is for the firm to build out over a further 1 million towers across the next 2 years so that the leading operators do not need to construct overlapping infrastructure.

The joint venture’s towers will feature shared base station antennas and power equipment, but operators will be able to install their own antennas and board cards. The creation of the tower company is expected to provide a boon to China Telecom and China Unicom by allowing them to expand their 4G coverage rapidly.

The smaller operators will be keen to regain ground against China Mobile, which boasts 82% of the country’s 4G connections and a 67% overall share of the market. The market leader has deployed over 1 million TD-LTE base stations in an 18-month period.