Financial reports of the three major operators: In 2020, 5G started with an explosion

In June 2019, the Ministry of Industry and Information Technology issued a 5G commercial license; on October 31, 2019, 5G was officially commercialized; in March 2021, the three major operators successively announced their 2020 financial reports, fully demonstrating the development achievements of 5G in 2020. In summary, in 2020, operators made full efforts to promote the explosive growth of 5G, made a good start for the 5G era, and built a solid foundation.

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5G infrastructure construction: scale, advancement, parallel development, cost reduction and efficiency improvement

Based on a comprehensive analysis of the financial reports of the three major operators, the achievements of 5G infrastructure construction in 2020 can be summarized in four key words.

• First, scale. In order to cope with the impact of the COVID-19 epidemic on the economy, the "new infrastructure" has been fast-forwarded. 5G is an important component, and the construction of base stations has been accelerated. By the end of 2020, my country had opened 718,000 5G base stations, far exceeding the planned 600,000. 70% of the world's 5G base stations are in China.

• Second, advancement. The three major operators have adopted the most advanced 5G network standards and have taken the lead in realizing large-scale commercial use of SA worldwide. They have basically realized the NFV of the core network, laying the foundation for flexible business deployment, and have built 5G private networks in three forms: dedicated, virtual and hybrid.

• The third is to keep pace. In addition to the frequency difference, the three major operators are basically the same in terms of the number of 5G base stations and technical maturity; in the 2G/3G/4G era, there were significant differences. For example, at the end of 2014 (the first full natural year of 4G commercial use), the number of China Mobile's 4G base stations accounted for more than 70% of the entire network.

• Fourth, reduce costs and increase efficiency. With the establishment of China Tower, operators began to build and share together. In the 4G era, the focus was on sites, while in the 5G era, it reached the network level. By the end of 2020, China Telecom and China Unicom had built a total of 380,000 5G base stations, saving 76 billion yuan in costs and achieving frequency sharing; China Mobile and China Broadcasting Corporation have also clarified the co-construction and sharing model and plan to make full efforts in 2021.

Number of 5G users: large number, high penetration rate and balanced

The development of 5G users in 2020 can be summarized by three key words: large quantity, high penetration rate and balanced.

• First, there are a large number of them. As of the end of 2020, the number of 5G package users of China Mobile, China Telecom and China Unicom were 165.003 million, 86.50 million and 70.83 million respectively, totaling 322.333 million, which is similar to the construction of 5G base stations and accounts for more than 70% of the global user share.

• Second, the penetration rate is high. Comparing the number of 5G package users with the total number of mobile users, China Mobile, China Telecom and China Unicom are 17.5%, 24.6% and 23.2% respectively, and the total for the entire network is 20.2%, that is, in the first full year of 5G commercial use, one in every five users is a 5G user. In contrast, in the first full year of 4G commercial use (2014), only China Mobile, which had the best development at the time, counted 4G users separately. By the end of December 2014, the 4G penetration rate was only 11.2% (as shown in Figure 1).

Figure 1 5G penetration rate and 4G penetration rate in the first full calendar year of commercial use

• The third is balance. Every iteration of mobile communication technology is an opportunity for industry reshuffle. Although China Mobile still occupies a leading position, there is a trend of balance. In terms of mobile users, China Mobile's share fell from 59.2% at the end of 2019 to 58.9% at the end of 2020, while China Telecom rose from 20.9% to 22.0%; in terms of 5G package users, China Mobile, China Telecom and China Unicom accounted for 51.2%, 26.8% and 22.0% respectively.

5G business revenue: driving revenue and ARPU value growth

Although the three major operators did not directly give the 5G business revenue in their 2020 financial reports, some related data can be used to analyze the value contribution of 5G to the operators' revenue.

• First, from the perspective of the main business revenue indicators of mobile. China Mobile reached 476.97 billion yuan, a year-on-year decrease of 2.8%, mainly affected by the decline in voice and text messages, while Internet access revenue reached 375.63 billion yuan, an increase of 0.3%; China Telecom reached 181.7 billion yuan, a year-on-year increase of 3.5%, continuing to maintain the largest growth rate among the three major operators; China Unicom reached 156.7 billion yuan, although the year-on-year growth was only 0.2%, but it turned from negative to positive. Behind the realization of the above growth rate, the biggest variable is the commercial use of 5G, which shows its value to the overall business revenue.

• The second is to analyze the changes in ARPU value. China Mobile's ARPU was 47.4 yuan, a year-on-year decrease of 4.0 percentage points; China Telecom's ARPU was 44.1 yuan, a significant decrease (50.5 yuan in 2018, 45.8 yuan in 2019); China Unicom's ARPU was 42.1 yuan, a year-on-year increase of 4.1%. Since the starting amount of 5G packages is generally higher than that of 4G packages, when users upgrade to 5G packages, the value contribution will increase significantly.

5G public services: focus on the development of terminals and special services

For the 5G public service market, terminals are the carriers of user scale, and special services are the driving forces for users to make in-depth use of the services. According to the information disclosed in the financial reports, all operators focused on the development of both in 2020.

• The first is terminals. On the one hand, operators focus on the supply of terminals, including mobile phones and other pan-intelligent terminals. China Mobile actively promotes the terminal industry chain to lower the threshold for 5G purchases; China Telecom launches the 5G cloud phone "Tianyi No. 1" and develops pan-intelligent 5G terminals through eSIM cards; China Unicom focuses on the provision of terminals in hot areas such as medical care, infotainment, sports and health. On the other hand, operators also focus on the sales of terminals. For example, China Unicom conducts 5G experience and terminal internal purchase meetings through physical channels, and realizes terminal sales through financial installments and other means.

• The second is featured content and applications. In the public market, operators focus on the realization of eMBB scenarios, so various cloud services and high-definition video applications have become the key applications promoted by the three major operators. Among them, China Mobile took the lead in launching new applications such as 5G+4K+VR ultra-high-definition live broadcast, 5G ultra-high-definition full-screen video ringtones, 5G cloud games, and 5G messages; China Telecom launched Tianyi Cloud Disk, Tianyi Ultra-High Definition, Video Ringtones, Tianyi Cloud VR, Tianyi Cloud Games, etc.; China Unicom promotes the development of VR/AR games, high-definition videos and other businesses. In addition, the major operators jointly released the "5G Message White Paper" and carried out platform construction to lay the foundation for the comprehensive development of business in 2021.

5G government and enterprise applications: building a foundation for capabilities and creating benchmark applications

The industry generally believes that 80% of 5G applications are for government and enterprise applications. In 2020, the three major operators will strengthen the infrastructure construction of 5G government and enterprise application capabilities based on the previous IoT business capabilities, and create benchmark projects.

• First, in terms of business capability building, we will focus on building 5G infrastructure. For example, China Mobile launched the "Beyond 5G" campaign to promote the demonstration of 5G vertical industries and build a new "5G+AICDE" infrastructure for vertical industries; China Telecom launched 5G customized network (private network) products, improved the resource layout of IDC and cloud, strengthened the full-stack service capabilities of public cloud, private cloud, exclusive cloud and hybrid cloud, built a "cloud-number-intelligence" integrated foundation, and strengthened MEC construction based on massive edge computer rooms; China Unicom released 5G private network products, built an intensive 5G private network/MEC self-service platform, and built a Unicom cloud resource pool, big data products and capability matrix, "Unicom Chain" (blockchain), Yanfei•Gewu DMP platform, etc.

• Second, in terms of benchmark projects, operators actively fight the epidemic and carry out pilot projects in key vertical industries. For example, China Mobile took the lead in proposing the BAF business model, successfully realized the productization of 5G private networks, and landed 470 private network projects; released nine industry platforms such as OneCity Smart City and OnePower Industrial Internet, and precipitated multiple use scenarios; for 15 sub-industries, more than 2,000 industry demonstration projects have been created. China Telecom has created vertical industry benchmarks such as industrial Internet, smart energy, smart medical care, and smart parks. 5G innovative applications such as remote control, machine vision, and AGV have been gradually implemented. Nearly 1,900 companies have signed contracts for 5G industry applications, and more than 1,100 landing scenarios have been implemented. China Unicom focuses on the fields of industrial Internet, smart cities, medical health, etc., and has created multiple 5G "lighthouse" projects, with more than 250 "lighthouse" high-quality customers.

5G in 2021: Convergence to empower social and economic development

Combining the financial reports of the three major operators and recent statements from senior executives, we can sort out the key points of 5G development in 2021.

• First, in terms of infrastructure construction, the three major operators will build 600,000 5G base stations in 2021, of which China Telecom and China Unicom will jointly build and share, and China Mobile and China Broadcasting Corporation will jointly build and share; for the 700MHz frequency band, it is not ruled out that it will be opened to China Telecom and China Unicom through roaming on other networks to achieve coverage of rural and other remote areas.

• Second, in terms of business capabilities, advanced technologies such as artificial intelligence, blockchain, cloud computing, and edge computing will continue to be integrated and provide support for the business in the form of an intensive platform.

• Third, at the product and application level, mobile phones and pan-intelligent terminals will be the focus of layout, especially full-band support will be achieved; 5G-featured public applications such as 5G messaging, cloud games, cloud conferencing, and video ringtones will become an important starting point; 5G industry applications will be based on early benchmarks to achieve popularization and promotion.