The three major operators released their third quarter financial reports. The transformation has been effective but there is still a long way to go.

Recently, the three major telecom operators have successively announced their unaudited main financial and operating data for the first three quarters of 2021. China Mobile's operating income in the first three quarters was 648.6 billion yuan, a year-on-year increase of 12.9%; net profit was 87.2 billion yuan, a year-on-year increase of 6.9%. China Telecom's operating income in the first three quarters was 326.536 billion yuan, a year-on-year increase of 12.3%; net profit was 23.327 billion yuan, a year-on-year increase of 24.7%. China Unicom's operating income in the first three quarters was 244.489 billion yuan, a year-on-year increase of 8.5%; net profit was 12.923 billion yuan, a year-on-year increase of 19.4%. Overall, the transformation of the three major telecom operators has achieved certain results. However, many problems can still be seen from the specific data.

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First, if only communication service revenue is considered, the growth rate of the three major telecom operators is less than 10%. China Mobile's communication service revenue was 572.9 billion yuan, up 9.0% from the same period last year; China Telecom's communication service revenue was 304.271 billion yuan, up 8.3% from the same period last year. Terminal sales have become an important driving force for communication service revenue. In the past few years, affected by the policies of the competent authorities, the three major telecom operators have significantly reduced terminal subsidies, which have been so low that they have affected the development of telecommunications business. Most of the mainstream telecom operators in the world use mobile phones, Internet devices and packages as bundles, and regard them as important marketing tools. Excessive compression of terminal sales is not conducive to the development of the main business, especially in the field of industrial Internet. Customers require service providers to provide integrated hardware and software solutions. If telecom operators simply provide communication services, they will not be competitive.

Second, 5G's role in driving mobile Internet traffic is gradually failing. According to data from the Ministry of Industry and Information Technology, in the first three quarters, my country's cumulative mobile Internet traffic reached 160.8 billion GB, a year-on-year increase of 35.8%. In September, the average mobile Internet access traffic (DOU) per household reached 13.36GB/household·month, a year-on-year increase of 23%, and 1.44GB/household·month higher than the end of last year. However, in May this year, DOU had reached 13.62GB/household·month, and there was no significant breakthrough in the following four months. Telecom operators have put into use more than 1 million 5G base stations, but 5G, which has the advantages of faster speed and lower unit traffic cost, has failed to continue to drive DOU growth. On the one hand, this shows that the industry has not made users fully aware of the use of 5G; on the other hand, it also shows that the marketing strategies of telecom operators in the past six months have lacked pertinence.

Third, industrial Internet revenue continues to be the main source of revenue growth for operators. In the first three quarters of 2021, the three major telecom operators achieved a total revenue of 168.1 billion yuan from emerging businesses, a year-on-year increase of 28.8% (data from the Ministry of Industry and Information Technology). China Unicom's industrial Internet business revenue increased by 25.3% over the same period last year, and China Telecom's industrial digitalization business increased by 16.8% year-on-year, but revenue growth was concentrated in fixed-line services such as IPTV, Internet data centers, big data, and cloud computing, and had limited impact on mobile communications business. Most of these services are still basic communications services that are difficult for other companies to get involved in, with limited potential and limited profits for operators.

Fourth, 5G industry applications have not brought enough benefits to the three major telecom operators. In the past two years, 5G investment has accounted for the majority of the investment share of the three major telecom operators, and operators have long realized that an important source of 5G revenue is industry applications. At present, operators in various regions have also established hundreds of industry applications, and there have been successful cases in ports, electricity, logistics, mining, smart factories, water conservancy, agriculture, security and other fields. However, the module cost is high, the business model is not clear, and the benefits of industry users have not been fully reflected. It will take time to establish clear and replicable industry application solutions so that operators and industry customers can benefit from technological progress together.

Overall, in the first three quarters of 2021, the transformation results of the three major telecom operators have begun to show, but 5G industry applications bring not only technological progress to telecom operators, but a brand new field. The industry ecology will face reconstruction, and telecom operators will face cooperation and multi-link competition from friendly competitors from different industry links such as network equipment vendors, Internet companies, industry application providers, terminal manufacturers, and content providers. How to find their own position and form core competitive advantages through continuous efforts to obtain satisfactory returns requires a broader vision and unremitting efforts.