The arrival of the fourth largest operator, what can it change?

On October 12, China Broadcasting Network Co., Ltd. was officially established in Beijing with a registered capital of 101.2 billion yuan, becoming the fourth largest operator in the country.

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It is reported that the company had completed its registration on September 25, 2020. It has a total of 46 promoters, including the original radio and television system and Internet giants. Among them, Alibaba and State Grid each invested 10 billion yuan, becoming the second largest shareholder after China Radio and Television.

The unveiling and establishment of China Radio and Television not only realized the long-cherished wish of radio and television people to establish a "national joint-stock company", but also meant that the "new radio and television" giant that carries the dual responsibilities of the national radio and television network and the radio and television 5G network has officially been named.

For yourself: a medicine to get out of the trough

Unlike the nationwide network model of China Telecom, China Mobile and China Unicom, for many years, radio and television networks have been scattered across provinces and cities and divided by region.

Although the radio and television industry has always wanted to become a corporate entity with a national network and unified operation and management, due to the above reasons and the lack of good opportunities, there has been no substantial progress in network integration.

In recent years, with the rise of mobile Internet, IPTV and OTT, the competitiveness of decentralized cable TV networks has continued to decline, the industry development has been very difficult, and even many local radio and television cable TV network businesses have experienced revenue losses.

In order to change this situation, China Radio and Television, taking advantage of the 5G license, began to accelerate the integration of the "One Network Nationwide".

On the one hand, the integration of existing cable network services can help China Radio and Television to more reasonably deploy the national 5G network. On the other hand, after the integration of the national cable network, it can enhance user value and market space, and better expand business and exert economies of scale.

Therefore, in February this year, the Central Propaganda Department and other ministries and commissions issued the "Implementation Plan for the Integration and Development of the National Cable TV Network", requiring China Radio and Television to take the lead and jointly establish a "National One Network" joint-stock company with provincial cable TV network companies, and specifying that the listed provincial network companies should invest in cash or the shares of listed companies held by their controlling shareholders. In June this year, the "National One Network" integration platform of radio and television was won by Gehua Cable, and various radio and television companies collectively announced their participation in the establishment.

However, China Radio and Television also stated that the formal establishment of China Radio and Television Network Co., Ltd. is only the initial integration result of the "One Network Nationwide" at the capital level. It is too early to talk about how much market vitality such integration can release.

Some analysts also said that the development of 5G network business is expected to bring an increase of 100 billion yuan in revenue to the radio and television system, which is 1.3 times the current revenue scale. After all, the current market value of listed radio and television companies is only 136.5 billion yuan, while the market value of the three major operators has reached 1.4 trillion yuan.

There is no doubt that this integration and reorganization not only achieved a breakthrough on the business side, but also introduced two major strategic investors, Alibaba and State Grid, at the capital level.

This is undoubtedly a great boon to China's radio and television industry, which is in a slump.

First, one of the huge costs of 5G network equipment is the power consumption, especially when the number of deployed base stations reaches a certain level, the cost is unbearable. Second, China Radio and Television’s traditional user thinking, business model and business innovation need to be adjusted.

State Grid and Alibaba can help China Radio and Television to quickly make up for the above shortcomings in terms of cost savings and innovation.

For the industry: Can it change the current situation of the three major operators?

Last June, the Ministry of Industry and Information Technology officially issued 5G licenses, announcing that my country had officially entered the 5G era. Unlike before, this time the licenses were issued to China Telecom, China Mobile and China Unicom, as well as China Radio and Television, which had already become the "fourth largest operator".

Since then, China Radio and Television has also obtained the 700M prime frequency band and announced that it will sign a contract with China Mobile to achieve joint construction and sharing of base stations, hoping to quickly build the 5G network with the widest coverage at a lower cost.

It is worth mentioning that the so-called "sharing and co-construction" can be simply understood as: users who use China Radio and Television's 5G, in addition to using the 5G base stations built by China Radio and Television itself, will also be able to use China Mobile's base stations, and the network speeds used by the two users are the same.

As we all know, China's three major operators have now formed a "one big and two small" situation, with China Mobile leading the market share by a large margin. Based on historical experience, it seems that every network upgrade will also bring about a reshuffle of the operator landscape, and this 5G network upgrade and the introduction of China Broadcasting Corporation are also seen as a move to balance the strength of each operator.

But does China Radio and Television really have the ability to change the current situation? The current answer is still no.

Theoretically speaking, after the integration, China Radio and Television has the basic conditions to fully deploy 5G. In addition to the previous frequency band division and base station joint construction, it has added a national network.

In addition, in terms of 5G network construction, due to its late start and the cleanup of 700M spectrum, China Radio and Television's progress is far behind the other three. According to Yang Jie, chairman of China Mobile, there is no specific network construction deployment in the 5G cooperation with China Radio and Television, and it is expected that the two sides will jointly build and share 5G next year.

It is understood that the original plan of China Radio and Television was to implement the construction of the network in 40 large and medium-sized cities that have completed the frequency clearance work from January to June this year, and start commercial preparations; to implement the network construction in 334 cities and key tourist cities that have completed the frequency clearance work from July to December, and plan to start market operations in June 2020; and to gradually achieve the goal of covering more than 95% of the population nationwide in 2021.

At present, the latest deployment progress of China Radio and Television has not been announced to the public, but it is certain that there have been some delays due to factors such as the epidemic.

In addition, before China Mobile and China Broadcasting Corporation reached an agreement on the joint construction and sharing of base stations, China Telecom and China Unicom also reached the same cooperation. Today's domestic operator landscape is considered to be "2+2". Some analysts also pointed out that a new situation of "one big and one small" may be formed in the future, that is, China Mobile + China Broadcasting Corporation occupy the main market, followed by China Telecom + China Unicom.

The reason is that although China Radio and Television has no user base and brand influence, it holds the prime frequency band and can still help China Mobile maintain its position as the market leader after jointly building and sharing with China Mobile.

For users: Increase 5G signal coverage

Of course, for ordinary users, what they care most about are practical issues such as whether the charges can be reduced and whether the signal can be better.

We noticed that along with the official establishment of the new company, there was also a new piece of news - China Radio and Television will issue mobile phone numbers in the 192 area. Other news shows that in addition to 5G services, China Radio and Television is expected to launch 4G services in the future.

This approach seems to be different from that of the existing three major operators.

Since 5G was commercially available last year, operators have launched their own 5G packages one after another, but due to price reasons, they have not been accepted by consumers. Recently, the news that the three major operators have removed some 4G packages from the shelves has caused heated discussions online and aroused dissatisfaction among users.

However, China Radio and Television's approach is understandable. On the one hand, the 700MHz spectrum is the golden frequency band for mobile communications, with the advantages of strong penetration, wide signal coverage, suitability for large-scale network coverage, and low networking costs.

For example, the coverage of a 700M 5G base station is equivalent to the coverage of ten ordinary 5G base stations. Therefore, compared with the other three, China Radio and Television's 5G network construction costs can be significantly reduced. Such base station deployment is particularly suitable for rural areas.

Therefore, if China Radio and Television's cost of building 5G is really much lower than that of the other three, and most of it is in rural areas, then China Radio and Television's 5G tariffs will theoretically be cheaper than the 5G packages that have been launched.

On the other hand, judging from the above-mentioned 5G plan of China Radio and Television, its goal is to cover 95% of the national users around the end of 2021. Compared with the network construction speed of the three companies, it is not ruled out that ordinary users will be the first to use China Radio and Television's 5G network.

But the fact is that, judging from the current deployment situation, China Radio and Television does not have the same obvious advantages in urban areas as in rural areas. Therefore, the competition for 5G users between China Radio and Television and other operators will still be a protracted battle.