5G promotes the transformation and upgrading of operators and expands new forms and models of information consumption

Recently, the website of the Central Commission for Discipline Inspection and the National Supervisory Commission announced the progress of rectification of China Mobile, China Unicom and China Telecom in the third round of the 19th Central Committee's inspection. The rectification of widespread problems in the communications industry has achieved phased results. On the other hand, the annual reports released by the three major operators are mixed. The popularity of new infrastructure such as 5G has brought new momentum to the development of the industry. Against the background of highly saturated traditional markets, continued promotion of speed increase and fee reduction, gradual decline of 4G dividends, and the need for large investments in 5G, the three major operators are undergoing a period of transformation.

[[320894]]

Rectification has achieved initial results

There are too many packages, which are hard to understand and choose; different rights for new and old users; false advertising of unlimited traffic; many harassing calls from virtual operators; and low service quality... Recently, the website of the Central Commission for Discipline Inspection and the National Supervisory Commission announced the progress of the rectification of the third round of inspections of the 19th Central Committee. China Mobile, China Unicom, and China Telecom were collectively exposed for the above problems. In response, the three major operators are actively rectifying.

For example, in response to the problem of "uninformed customization and other infringements on the interests of the masses" pointed out in the inspection report, China Mobile increased the weight and scope of customer satisfaction assessments, and cancelled assessments such as provincial companies' industry shares that were not conducive to the company's long-term and healthy development. The number of complaints about service quality issues such as uninformed customization across the entire network fell by 73% year-on-year; China Telecom also cancelled market share assessments, increased service quality assessments, and increased the weight of customer service assessments from 8 points to 30 points.

In response to the complexity of packages, China Unicom promptly removed products that did not meet market demand and streamlined more than 400 packages; as of December 31, 2019, China Telecom's public packages on sale decreased by 60% compared to the end of 2018.

In response to the problem of numerous harassing calls and text messages, China Unicom has strengthened real-name authentication for network access, cleared illegal voice lines, shut down 262,000 illegal numbers and 107 voice lines, and launched the "Unicom Call Butler" service. Since October 2019, the average daily number of reports of harassing calls has dropped by 33% compared to before the central inspection; China Telecom has completed the construction and promotion pilot of the "Do Not Call" platform, providing customers with customized harassing call blocking services, and has also implemented nationwide sharing of blacklists, optimized keyword blocking on a daily basis, and blocked more than 100 million spam text messages per month across the group.

Finding a breakthrough to increase revenue

Recently, the three major operators have successively announced their financial report data for 2019.

Judging from the revenue data, China Mobile's revenue in 2019 was 745.9 billion yuan, a year-on-year increase of 1.2%, and it was the only one that maintained growth; China Telecom's revenue was 375.734 billion yuan, a year-on-year decrease of 0.4%; China Unicom's revenue was 290.51 billion yuan, a year-on-year decrease of 0.1%.

In terms of net profit, China Mobile's net profit was 106.641 billion yuan, a year-on-year decrease of 9.5%, the largest decline among the three major operators; China Telecom's net profit was 20.517 billion yuan, a decrease of 3.3% from last year; China Unicom's net profit reached 11.3 billion yuan, a year-on-year increase of 11.1%, making it the only operator among the three major operators whose profits continued to grow.

According to the economic operation of the communications industry from January to February 2020 released by the Ministry of Industry and Information Technology, as of the end of February, the total number of mobile phone users of the three basic telecommunications companies reached 1.58 billion, basically the same as the same period last year, and the number of mobile phone users has entered a stable period. Industry insiders believe that with the highly saturated market, vigorous speed increase and fee reduction, fierce market competition and the gradual decline of 4G traffic dividends, the growth of operators' traditional businesses will inevitably be challenged. On the other hand, creating differentiated business advantages and improving innovative business capabilities have become a breakthrough for operators to increase revenue.

For example, in 2019, China Unicom's industrial Internet revenue increased by 43% year-on-year to 32.9 billion yuan, accounting for 12.4% of the overall service revenue, becoming an important driving force for stabilizing service revenue. Thanks to the rapid growth of innovative businesses, the company's fixed-line service revenue reached 105.7 billion yuan, a year-on-year increase of 9.7%. In terms of emerging markets, China Mobile has expanded its international business and strengthened its development efforts in four new areas: equity investment, digital content, and financial technology. In 2019, international business reached 9.5 billion yuan, with revenue increasing by 31.4%.

5G leads new development

As we all know, new infrastructure is on the rise, 5G has become the leader, and operators are the main builders and operators of 5G networks.

At present, China is still in the stage of large-scale 5G construction. Wang Zhiqin, deputy director of the China Academy of Information and Communications Technology, analyzed that 2020 is a critical period for 5G network construction. It is expected that by the end of the year, more than 550,000 5G base stations will be put into operation nationwide, achieving continuous outdoor coverage in prefecture-level cities, key coverage in counties and towns, and indoor coverage in key scenarios. Many experts believe that the COVID-19 epidemic has not only failed to inhibit operators' network upgrades, but may instead become a catalyst for the accelerated deployment of 5G.

Recently, the Ministry of Industry and Information Technology issued the "Notice on Promoting the Accelerated Development of 5G", which clearly proposed 18 measures in five aspects, including accelerating the construction and deployment of 5G networks, enriching the application scenarios of 5G technology, continuously increasing the research and development of 5G technology, focusing on building a 5G security system, and strengthening organizational implementation. Operators responded positively, studied and proposed tasks and measures to accelerate the development of 5G and implemented them quickly. China Mobile said that it will strive to exceed the goal of reaching a total of 300,000 5G base stations in 2020 ahead of schedule, ensure that 5G commercial services will be provided in all cities above the prefecture level in the country within the year, and it is expected that the net increase of 5G users will be 70 million in 2020. China Unicom and China Telecom have launched the joint construction and sharing of the national 5G network. By the end of this year, China Unicom's 5G network will cover all prefecture-level cities, developed county towns and other key areas across the country, with a total of 300,000 stations.

In addition, the three major operators have announced their investment plans for 5G this year. China Mobile expects capital expenditures to be 179.8 billion yuan, of which 5G-related investment plans are about 100 billion yuan, while China Unicom and China Telecom's 5G capital expenditure budgets are about 35 billion yuan and 45.3 billion yuan, respectively. It is worth noting that in addition to network construction, operators have also made efforts to apply 5G, accelerate the integration of 5G into various industries, serve the public, and expand new formats and models of information consumption.