The merger would allow China to rollout 5G mobile networks in a more efficient and cost effective manner, giving it a decided advantage over its rivals in the US

China could potentially merge two of its three biggest telcos, in an attempt to help it regain the initiative in its 5G arms race with the US.

The Chinese government is looking at plans to merge China Telecom and China Unicom, sources told the Bloomberg news agency.

Should the merger go ahead, the newly formed entity would boast 584 million subscribers, enabling it to leverage enormous economies of scale, the likes of which US operators could only dream of.  

As China-US relations continue to deteriorate in the face of escalating trade tensions, China is placing renewed importance on its desire to be "first for 5G".

"5G success is one of the most important goals to China and the merger is the perfect solution to what China wants to achieve," Edison Lee, an analyst at Jefferies Hong Kong Ltd., told Bloomberg.

"As we head into another step up in the U.S.-China trade war, we believe the State Council would be more eager to think fresh and more radically about how to accelerate 5G rollout."

Shares in both companies rose on the Hong Kong stock exchange following speculation of the merger on Wednesday.  

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