Driven by 5G and innovative services: Operators' profitability has been significantly improved

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Recently, the three major operators have successively released their financial reports for the first three quarters of 2021. The first three quarters basically set the tone for the whole year's operating conditions. Therefore, they attracted industry attention as soon as they were announced.

Financial statements of the three major operators in the first three quarters of 2021

In terms of business performance, the three operators have achieved substantial growth in revenue and net profit, and the industry has clearly recovered. As an industry giant, China Mobile still ranks first in revenue and net profit, with a revenue growth rate of 12.9%; in terms of net profit, China Mobile is the only one, but the other two operators have also exerted their potential. Telecom's net profit growth rate is close to 25%, the highest among the three, and China Unicom's growth rate is also significantly higher than China Mobile.

In terms of mobile business, 5G is still the biggest variable. Data shows that as of the end of the third quarter, China Mobile had the largest number of 5G package customers among the three carriers, reaching 331 million, and the three carriers combined exceeded 600 million. Among them, China Unicom had the highest 5G package penetration rate, reaching 43%.

Overall, driven by the dual engines of 5G and innovative businesses, the financial reports of the three operators in the first three quarters showed significant growth, and all achieved high-quality transformation and development.

The data for the first three quarters is released, and the total profit exceeds 100 billion

Data shows that in the first three quarters of 2021, China Mobile achieved revenue of 648.6 billion yuan, up 12.9% from the same period last year; of which communication service revenue was 572.9 billion yuan, up 9.0% from the same period last year; EBITDA was 237.5 billion yuan, up 9.5% from the same period last year; profit attributable to shareholders was 87.2 billion yuan, up 6.9% from the same period last year.

In terms of mobile business, as of September 30, 2021, the total number of China Mobile's mobile customers reached approximately 956 million, with a net increase of 10.2 million mobile customers in the third quarter, and the growth in the number of mobile customers continued to improve; the number of 5G package customers reached 331 million, and the number of 5G network customers reached 160 million, and the customer structure continued to be optimized.

According to the data, in the first three quarters, China Mobile's mobile customers' mobile Internet traffic reached 90.8 billion GB, a year-on-year increase of 39.1%, and mobile Internet DOU (average monthly Internet traffic per household) exceeded 12GB; mobile ARPU (average revenue per user) was 50.1 yuan, a year-on-year increase of 2.6%.

China Telecom achieved operating revenue of 329.241 billion yuan in the first three quarters, a year-on-year increase of 12.5%, of which service revenue was 304.271 billion yuan, an increase of 8.3% over the same period last year; net profit was 23.327 billion yuan, an increase of 24.7% over the same period last year, and after excluding the one-time after-tax gain of 1.416 billion yuan from the sale of equity in a subsidiary company, it increased by 17.1% year-on-year. In addition, EBITDA was 96.348 billion yuan, an increase of 4.5% over the same period last year, the EBITDA rate was 31.7%, and free cash flow was 23.168 billion yuan, a year-on-year increase of 19.6%.

It can be seen that China Telecom's revenue and net profit growth both exceeded double digits, and the net profit growth was close to 25%, the highest among the three companies. Zheshang Securities Research Report believes that China Telecom has shown a more balanced development and leading innovation capabilities, which has helped China Telecom to perform more prominently in operating data.

In terms of user numbers, in the first three quarters, China Telecom's mobile users increased by 18.64 million, continuing to maintain its industry leadership, reaching about 370 million. The number of 5G package users increased by 69.04 million, reaching about 156 million, and the penetration rate reached 42.1%. The total mobile Internet traffic increased by 39.3% year-on-year, and the ARPU of mobile users was 45.4 yuan, continuing to grow compared with the same period last year.

Public data shows that China Unicom's revenue in the first three quarters was 244.489 billion yuan, up 8.5% from the same period last year, and service revenue was 222.384 billion yuan, up 7.3% from the same period last year. EBITDA was 75.337 billion yuan, up 2.2% from the same period last year, and EBITDA accounted for 33.9% of service revenue. Net profit was 12.923 billion yuan, up 19.4% from the same period last year.

In terms of user numbers, in the first three quarters, China Unicom's mobile bill users increased by 9.74 million to 316 million, and 5G package users increased by 66.12 million to 137 million, effectively driving the mobile bill user ARPU to grow by 6.3% year-on-year to 44.3 yuan. At the same time, fixed-line broadband users increased by 6.9 million to 93 million.

In general, the growth rate of traditional mobile data and Internet business revenue of the three major operators has slowed down, and the driving effect on the operators' performance has obviously declined. However, the revenue in the home market, government and enterprise market, including DICT fields such as cloud services and data centers has increased significantly, becoming an important growth engine.

The driving effect of emerging businesses is obvious and the income structure continues to be optimized

Currently, emerging businesses are becoming the main growth driver for operators. Last year, the three operators achieved revenue of 174.3 billion yuan from emerging businesses, a year-on-year increase of 26.9%. The proportion of emerging businesses in business revenue increased from 10.5% last year to 12.9%, driving business revenue growth by 2.82 percentage points. This trend is even more obvious in 2021.

China Mobile pointed out in its financial report that its government and enterprise market has strong growth momentum. In the first three quarters, China Mobile's DICT business revenue reached 48.9 billion yuan, maintaining rapid growth. In 2019, after a drastic top-down reform and innovation of government and enterprise business, China Mobile's government and enterprise business began to show development potential. In 2020, China Mobile's DICT market revenue reached 43.5 billion yuan, a year-on-year growth rate of 66.5%, and the proportion of revenue in the government and enterprise market increased from 29.1% in 2019 to 38.5%.

In the first half of 2021, the number of China Mobile's government and enterprise customers reached 15.53 million, with a net increase of 1.69 million. Revenue from the government and enterprise market continued to grow rapidly, reaching RMB 73.1 billion, a year-on-year increase of 32.4%. Private line revenue reached RMB 13.5 billion, a year-on-year increase of 7.7%. DICT revenue reached RMB 33.4 billion, a year-on-year increase of 59.8%, contributing 3.5 percentage points to the growth of communication service revenue, leading the industry in growth rate. Among them, mobile cloud revenue reached RMB 9.7 billion, a year-on-year increase of 118.1%, and the share of public cloud revenue entered the top ten in the industry; IDC revenue reached RMB 11.8 billion, a year-on-year increase of 27.0%.

As we all know, home business is the "trump card" of China Telecom. In recent years, in the face of market changes, China Telecom has laid out home informatization, built a smart home DICT product and service system, and further promoted the "three gigabit" service consisting of "5G+optical broadband+WiFi6", so that the value of broadband access business has been reshaped and the value of smart home business has been gradually reflected.

In the first three quarters of 2021, China Telecom's fixed-line and smart home service revenue reached RMB 85.498 billion, a year-on-year increase of 4.7%. The net increase in wired broadband users was 9.11 million, reaching 168 million. Broadband access revenue reached RMB 56.896 billion, a year-on-year increase of 6.8%. Broadband access ARPU reached RMB 38.8, maintaining an upward trend compared with the same period last year. Smart home revenue increased by 30.3% year-on-year, driving the comprehensive broadband ARPU to RMB 46.1, a year-on-year increase of 4.5%.

At the same time, China Telecom's industrial digitalization revenue scale and market share lead the industry, and it is the largest IDC service provider and public cloud operator in China. Since the beginning of this year, China Telecom's industrial digitalization business has maintained rapid growth, with revenue reaching RMB 74.1 billion, a year-on-year increase of 16.8%, and its revenue scale and market share remain the industry leader.

Thanks to the increase in 5G user penetration, the promotion of content rights, and the scale development of broadband and mobile convergence, China Unicom performed outstandingly in the first three quarters. In terms of innovative business, the industrial Internet revenue in January-September was 40.925 billion yuan, a year-on-year increase of 25.3%, accounting for 18.4% of the main revenue, and continued to contribute to growth momentum.

Currently, 5G has entered the stage of simultaneous construction and use from construction to promotion. The user penetration rate of China Unicom's 5G packages is as high as 43.4%, effectively driving ARPU to increase by 6.3% year-on-year to 44.3 yuan. With the increase in 5G penetration and the continuous promotion of innovative businesses, China Unicom's performance development will further improve.