The three major operators' performance in the first half of 2021 collectively "rejuvenated": 5G drives value return and emerging business revenue growth is outstanding

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The traditional communication business market is becoming saturated and competition is becoming increasingly fierce. Under the policy of increasing speed and reducing fees, the revenue level is constantly declining and the development space is limited. Not long ago, there were constant voices about the "sunset" of the telecommunications industry. However, as operators gradually explore and implement new business models, new pillars of performance growth are emerging.

Recently, the three major operators have successively released their performance reports for the first half of 2021. Faced with the complex internal and external environmental challenges in the first half of the year, the three operators did not seem to be greatly affected, and both revenue and profit increased, and the increase was large. After experiencing the lows in the past few years, the three major telecom operators "went away for half a lifetime, and returned as the kings"!

Returning is still the king: revenue and profit both increased in the first half of the year

According to the financial report, in the first half of 2021, China Mobile's operating revenue reached RMB 443.6 billion, a year-on-year increase of 13.8%, of which communication service revenue reached RMB 393.2 billion, a year-on-year increase of 9.8%. Profit attributable to shareholders was RMB 59.1 billion, a year-on-year increase of 6.0%. It is worth mentioning that this is the largest increase in net profit in the first half of China Mobile in the past decade.

China Telecom achieved double-digit growth in both revenue and profit in the first half of the year. Operating income was RMB 219.2 billion, a year-on-year increase of 13.1%; service revenue was RMB 203.5 billion, a year-on-year increase of 8.8%, higher than the industry average; net profit was RMB 17.7 billion, a year-on-year increase of 27.2%.

The financial report released by China Unicom shows that in the first half of this year, China Unicom achieved operating income of RMB 164.2 billion, a year-on-year increase of 9.2%; service revenue reached RMB 148.7 billion, a year-on-year increase of 7.5%, an increase of 3.2 percentage points over the full year of 2020. Pre-tax profit in the first half of the year exceeded RMB 10 billion for the first time in recent years, reaching RMB 11.3 billion; profit attributable to equity holders of the company reached RMB 9.17 billion, a year-on-year increase of 21.1%, an increase of 10.8 percentage points over the full year of 2020.

If we look at it from the perspective of revenue and profit alone, all three operators have achieved growth. However, if we break it down further, we will find that the business growth points of the operators have undergone a major shift.

Profit growth pillar transformation: Emerging business revenue growth momentum is outstanding

It is an indisputable fact that the growth of operators' traditional telecom business continues to decline. As the user scale and revenue growth have reached their peak, the telecom industry has entered a fiercely competitive stock market. However, telecom operators are continuously operating enterprises. In order to achieve sustainable development, the three major operators have expanded their territory and developed emerging businesses.

As the first of the three major operators, China Mobile, based on its leading position in the personal mobile market, continues to expand its business in the home market, government and enterprise market, and new business market; China Telecom effectively superimposes its business to form a smart application ecosystem consisting of smart home, DICT, Internet of Things, and Internet finance for coordinated development; China Unicom takes advantage of mixed reform to focus on key industry markets and accelerate the expansion of innovative business. The new businesses of the three major operators are booming, each with its own advantages.

According to the economic operation of the communications industry in the first half of 2021 released by the Ministry of Industry and Information Technology, the revenue of operators' emerging businesses increased significantly in the first half of the year. The three basic telecommunications companies actively developed emerging businesses such as IPTV, Internet data centers, big data, and cloud computing. In the first half of the year, they completed a total of 114.5 billion yuan in emerging business revenue, a year-on-year increase of 27%, accounting for 15.2% of telecommunications business revenue, driving the growth of telecommunications business revenue by 3.5 percentage points. Among them, cloud computing and big data revenues grew by 96.7% and 31.3% year-on-year, respectively.

Let's look at China Mobile first. In the home market, revenue maintained rapid growth, reaching RMB 50.1 billion, a year-on-year increase of 33.7%. In the government and enterprise market, China Mobile's government and enterprise market revenue maintained rapid growth, reaching RMB 73.1 billion, a year-on-year increase of 32.4%. Dedicated 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%. 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%. In terms of emerging markets, China Mobile's emerging market revenue in the first half of the year achieved rapid double-digit growth, reaching RMB 14.5 billion, a year-on-year increase of 22.6%. International business revenue reached RMB 6.8 billion in the first half of 2021, a year-on-year increase of 19.5%.

In the first half of the year, China Telecom, which had the largest year-on-year profit growth, also had remarkable operations in new businesses. China Telecom's impressive performance in the first half of the year was partly due to the growth of industry digitalization. Its revenue in the first half of the year reached RMB 50.1 billion, a year-on-year increase of 16.8%. Among them, Tianyi Cloud's revenue reached RMB 14 billion, a year-on-year increase of 109.3%, exceeding the total revenue for the whole year of 2020. At the same time, smart home revenue reached RMB 7.2 billion, a year-on-year increase of 32.9%, and the number of whole-house WiFi and Tianyi Home Security users increased by 99.5% and 231.9% respectively compared with the same period last year.

China Unicom's innovative performance has been gradually consolidated. In the first half of the year, the revenue of industrial Internet business increased by 23.6% year-on-year to RMB 28.03 billion, and the proportion of overall service revenue increased by 2.5 percentage points year-on-year to 18.9%. Unicom Cloud revenue increased by 54.1% year-on-year to RMB 7.69 billion. Driven by the good growth of innovative business, fixed-line service revenue reached RMB 65.3 billion, a year-on-year increase of 7.9%.

5G drives value return: development momentum is further enhanced

Unlike other businesses, the benefits that 5G brings to operators cannot be quantified specifically, because the powerful gain effect brought by 5G is immeasurable. China Telecom is deeply aware of this.

5G has ushered in a new era of digitalization where everything is connected. At the same time, it has also superimposed emerging technologies such as cloud computing and artificial intelligence to promote the vigorous development of the digital economy. It is also with the in-depth development of 5G in ToC mobile services and ToB industrial digital services that operators' performance growth is driven.

"The growth of 5G revenue has become an important driving force for overall revenue in the first half of the year," said Liu Guiqing, deputy general manager of China Telecom, at the mid-term performance briefing. At the same time, industry applications are the current hot spots in the development of 5G. After nearly two years of practice, the characteristics of 5G network as a service, including network slicing, low latency, and large connections, have brought users the effects of reducing costs and increasing efficiency, saving manpower, and improving safety production capabilities in some typical application scenarios.

In Liu Guiqing's view, 5G's industrial applications are in a stage of explosive development. First, the prices of 5G terminals, modules, and private network equipment continue to decline, and the acceptance of operators and users continues to increase; second, the 5G business model continues to mature; in addition, the industry environment is getting better and better, and the relevant competent authorities have vigorously promoted the scale expansion of 5G applications in various industries, which has also brought a good environment for the development of 5G. "The current role of 5G applications in driving revenue growth is in the process of continuous emergence and improvement. I believe that for a long time in the future, it will gradually become the main driving force for the growth of industrial digitalization."

It is precisely because of the economic benefits behind 5G that the three major operators attach great importance to it. China Unicom said that it will continue to deepen the leadership of 5G, firmly and rationally regulate competition, effectively balance value management and scale development, promote the dual increase of mobile user market share and value contribution, and promote high-quality coordinated development of the industry. At the same time, it will strengthen the collaboration of 5G terminals, networks, and services, enrich 5G innovative applications, and release the value of 5G users. In the public market, relying on efficient and intensive IT support capabilities, it will strengthen the digitalization and differentiated innovation and integrated operations driven by 5G, and continue to promote the iterative development of innovative products. In the government and enterprise market, it will seize the opportunities of digital transformation of the whole society and industry, actively promote the integrated innovation and development of 5G+ vertical industry applications, and realize the commercialization of 5G.

The determination to accelerate the layout of 5G has also accelerated the pace of operators to return to the A-share market. Recently, China Mobile's application for listing on the A-share market was accepted by the China Securities Regulatory Commission. The amount of funds to be raised is RMB 56 billion. The construction of 5G networks is one of the main uses of China Mobile's fundraising this time. Yang Jie, chairman of China Mobile, said that 2020 to 2022 will be the peak period for 5G investment. China Telecom also said that it is seizing the time to return to the A-share market, and its A-share stocks will be listed on the Shanghai Stock Exchange on August 20.

From co-construction and sharing to returning to A-share, all the actions taken by operators are aimed at accelerating the rapid development of 5G. The huge economic value brought by 5G is the main driving force, which will open up the next more exciting decade for operators.