Analysis: The battle for existing capacity is becoming more and more obvious, and the role of broadband may become more prominent

The continuous loss of mobile phone users has become a prominent problem that China Mobile and China Unicom have to focus on solving. With the mobile phone penetration rate already exceeding 113 units per 100 people, even if the operators do not have large-scale growth, they must do their best to ensure the stability of existing users. However, under the direct catalysis of the "card cutting" action, the dual pressure of dewatering and retaining will inevitably further intensify the competition for existing users.

1. The growth of mobile phone users has shown obvious differentiation

Although the COVID-19 pandemic affected user development at the beginning of 2020, this impact has gradually weakened as the epidemic has basically stabilized. According to data released by the Ministry of Industry and Information Technology, the scale of mobile phone users was 1.594 billion at the end of 2020, a decrease of 7.28 million from 2019.

Data from the monthly operating reports for 2020 released by the three major basic telecommunications operators showed that the number of mobile phone users of China Mobile and China Unicom experienced negative growth in more than 50% of the months throughout the year. In sharp contrast, China Telecom maintained positive growth throughout the year except for the negative growth at the beginning of the year.

Regardless of the reasons for this differentiation, the obvious trend is that after the "card cutting" campaign, the mobile phone users of the three major operators have shown signs of a downward trend in growth. It can be said that the operators have been unable to solve the water problem for a long time, and the "card cutting" campaign has solved it, at least it has had a great impact.

2. The battle for existing stock is becoming more and more obvious

If the negative growth in mobile phone users in 2020 is not enough to attract the attention of China Mobile and China Unicom, the data in January 2021 will further alert the senior managers of these two companies, especially those in charge of the mass market, because the differentiation trend in 2020 tends to continue into 2021.

If we only look at the data, the scale of users lost by China Mobile and China Unicom is basically equivalent to the number of net users added by China Telecom. Regardless of whether the two have an exact equal relationship, we believe that China Telecom has gained an advantage in the net increase of existing users, or has continued its advantage since 2020.

Although there is no clear data to explain the source of China Telecom's mobile phone user growth, there is public information that China Telecom has gained an advantage in the competition for number portability. Even if China Telecom has gained an advantage in number portability, the total number of number portability users is limited and cannot support such a large net increase in users.

Given that the number of new ID card users is limited and the number of users participating in number portability is also limited, the largest source of China Telecom's net increase in mobile phone users should be achieved through broadband bundling, that is, developing mobile phone users through fixed-mobile convergence. This reasoning can be supported by the data alone.

What strategies can be used to deal with competition?

Although China Mobile has maintained a clear advantage in the broadband market, China Telecom has also achieved user growth of a comparable scale as expected. In the process of this growth, China Telecom has also gained a large number of additional mobile phone users, and it is very likely that these users were acquired from China Mobile.

From the data point of view, it is a thing of the past to simply deal with competition through the mobile market. Now we need to upgrade to version 2.0, that is, to develop mobile phone users through the broadband market. This is especially important for China Mobile, after all, its more than 300 million mobile phone users have not yet been effectively bundled with broadband.

The joint construction and sharing of 5G by China Unicom and China Telecom has indeed saved both of them a lot of money. These saved funds will naturally be used for other network construction or user development levels, which to a certain extent has brought considerable competitive pressure to China Mobile.

The growth rate of China Telecom's mobile phone users is closely related to its crazy offensive in the broadband market. It should be said that under the 5G infrastructure strategy, China Mobile's funding for application and broadband construction is limited. In the key areas where it cannot complete the enclosure, it is also impossible to develop users, which ultimately gives its competitors a chance to breathe.

Currently, the blind spots of broadband construction are in remote areas or old communities with fierce competition. Large investments but few potential users and serious monopoly have put a lot of pressure on operators' broadband development. Even so, only by seizing the right place can we obtain the right time and people.

In addition to broadband, how much support does 5G provide for the expansion of mobile phone users? We believe that 5G is currently mainly concentrated in large cities and prefecture-level cities, and is now gradually extending to county-level cities and even townships. 5G users are basically converted from 4G. Even if the 5G network coverage is strong, it is difficult to form a strong support for the development of mobile phone users to a certain extent. Of course, this can form a bundle for users. Therefore, focusing on broadband will still be the key work in 2021.