China may be on the verge of sacrificing competition on the altar of 5G. Seemingly terrified of falling behind the US in the race to build a next-generation mobile network, its authorities are reportedly poised to merge China Telecom and China Unicom to create a mobile giant with more than half a billion customers, according to a report this week from Bloomberg.

The move could produce a much stronger telco with the muscle to build a 5G network more speedily. But it would inevitably leave China with just two big national players: the new-look China UniTel (as it may be called), plus market leader China Mobile, which currently serves more than 900 million mobile subscribers. (See China Telecom Beats Rivals but Gets Lost in Translation.)

While both China Telecom Corp. Ltd. (NYSE: CHA) and China Unicom Ltd.(NYSE: CHU) seem to have denied or played down knowledge of the government scheme, investors are taking the Bloomberg report seriously. In Hong Kong, shares in the state-backed operators rose 4% yesterday, after the news surfaced. Nor did the Bloomberg report come entirely out of the blue: Rumors of a merger between Telecom and Unicom have circulated for several years as the two operators have continued to labor in the shadows of the far mightier China Mobile Communications Corp.