The three major operators had a good start in 2021: China's 5G has crossed the inflection point of value growth

Three companies reported: 5G driving effect is evident

In the first quarter of this year, China's three major operators all achieved positive growth in both revenue and profit. Among them, China Mobile's revenue was 198.4 billion yuan, a year-on-year increase of 9.5%, and the profit attributable to shareholders was 24.1 billion yuan, a year-on-year increase of 2.3%; China Unicom's revenue was 82.272 billion yuan, a year-on-year increase of 11.4%, and the profit attributable to equity holders was 3.843 billion yuan, a year-on-year increase of 21.4%; China Telecom's revenue was 106.873 billion yuan, a year-on-year increase of 12.7%, and the profit attributable to shareholders was 6.441 billion yuan, a year-on-year increase of 10.6%.

[[396874]]

This is a very impressive performance when the previous performance growth slowed down or even showed negative growth, especially when ARPU declined year after year. The rapid development of 5GtoC business has become an important driving factor. In their respective financial reports, they also mentioned the driving role of 5G.

China Mobile pointed out that its total number of customers is about 940 million, of which the total number of 5G package customers has reached 189 million, the total number of 5G network customers has reached 92.76 million, and the customer structure has continued to optimize. Through the in-depth implementation of the "5G+" plan, it has led to the accelerated upgrading of information and communication consumption, achieving a mobile ARPU of 47.4 yuan, a year-on-year increase of 0.9%.

China Unicom pointed out that it has led consumption upgrades through innovative 5G applications, leveraging content, rights and financial tools to enhance product value and strengthen pan-integrated services. Its mobile billing users increased by 3.48 million to 309.29 million, and 5G package users increased by 21.02 million to 91.85 million, effectively driving the mobile billing user ARPU to grow by 11.5% year-on-year to 44.6 yuan.

China Telecom pointed out that its 5G business continued to penetrate rapidly, with 5G package users reaching about 111 million, a penetration rate of 31.2%, and mobile users reaching about 356 million, a net increase of 5.23 million. The total mobile Internet traffic increased by 43.9% year-on-year, and the ARPU of mobile users was 45.6 yuan, a year-on-year increase of 2.7%, achieving a stabilization and recovery.

Coincidentally, as one of the first countries in the world to commercialize 5G, South Korean operators have also fully felt the benefits of 5G, even earlier. An article published in Mobile World Live pointed out that in 2020, the country's three operators all recorded year-on-year growth in mobile revenue and a significant increase in ARPU. Data from the Ministry of Science and ICT (MSIT) of South Korea showed that as of the end of January this year, the number of 5G users in the country reached 12.87 million, and the monthly increase exceeded one million for the first time. Considering South Korea's population of 52 million, this number is quite impressive.

5G Success Gene: Why China Leads the World

According to GSMA think tank statistics, as of the end of March this year, 157 5G networks have been put into commercial use in 62 countries and regions. China is in an absolute leading position in all relevant data of 5G. Facts have proved that "Look to China for 5G development" is not an empty statement. What are the genes of success behind this?

First of all, "If you want to be rich, you must first build roads." China proposed to adhere to the "moderately advanced" construction rhythm at the beginning of 5G network construction. By the end of 2020, my country had built 718,000 5G base stations, and the independent networking mode 5G network covered all cities and prefectures across the country; by the end of March this year, a total of 819,000 5G base stations had been built. A network with wide coverage, high performance and excellent experience is the foundation for the commercial success of 5G. It is not difficult to see from the leaders in China and South Korea that the more determined the investment in 5G deployment and the clearer the network construction plan, the more likely they will get returns first.

Secondly, the rapid expansion of 5G user scale also depends on the prosperity of the terminal ecosystem. Last year, 5G-compatible terminals accounted for 70% of the shipments of newly launched smart terminals in my country. More importantly, the entry-level price has dropped to 1,000 yuan, and it is expected that shipments will reach 280 million units this year. Yang Jie, chairman of China Mobile, said at the "Future of 5G" forum at the Boao Forum for Asia 2021 Annual Meeting that the total economic output driven by 5G last year exceeded 800 billion yuan, half of which came from 5G terminal consumption.

Third, business innovation is essential to fully let users experience the differentiated advantages of 5G. Chinese operators have made remarkable investments and explorations in this regard, developing a wide range of immersive and interactive 5GtoC applications and content. As a result, the usage time of 5G users in video services, social media services, and gaming services with relatively high APRU increased by 16%. For example, Zhejiang Mobile took the lead in developing 5G new messages nationwide. As of the end of January this year, there were more than 7.13 million daily active users and an average of 4.81 million messages sent per day.

Driven by "industrial digitalization", my country's 5GtoB has also entered the eve of large-scale application. Last year, the three major operators signed more than 1,000 contracts involving a total amount of US$1.2 billion. The manufacturing, coal mining, power grid, steel, chemical, medical and other industries have basically achieved "from 1 to N" replication. In addition, the application conditions of typical industry scenarios such as remote control, video backhaul, machine vision, and real-time positioning are all mature.

Finally, and most importantly, the rapid development of 5G cannot be separated from the support of the country's industrial policies. Taking spectrum policy as an example, my country not only has no spectrum auction, but also issued a notice to reduce the standards for some radio frequency occupation fees as early as April 2018, exempting frequency occupation fees from one to three years from the date of license issuance, and reducing them from four to six years, while also reducing the standards for frequency occupation fees above 3GHz.

In contrast, the United States, which "got up early but arrived late", initially had no choice but to stick to millimeter waves due to the lack of available mid-band spectrum. The C-band auction finally came, but now it is under the huge expenditure pressure of up to US$81 billion, which may affect the subsequent network construction and package settings. Of the 280MHz C-band spectrum auctioned this time, 100MHz will not be commercially available until the end of 2021 at the earliest, and the remaining 180MHz will not be available until 2023.

According to Everett Rogers's innovation diffusion theory, for innovation to continue to spread in a social system, a certain number of people must first adopt the innovation, usually 10%-20% of the population. As we can see, as China's 5G penetration rate crosses this threshold, value growth has entered the fast lane. With China's "beautiful example", global 5G commercial use is expected to usher in another climax.

On the other hand, 5G is not only a "good business" for operators, but also the focus of a new round of scientific and technological revolution and industrial transformation. It is also related to economic and social development and the construction of national competitiveness, and has become a frontier for major countries and regions in the world to compete for. Any new technology will encounter some problems in the early stages of application. For China's 5G, which has been developing rapidly, we should also maintain sufficient strategic patience, and the future will be promising.