2019 Communications Industry Statistical Bulletin: How are the three major operators doing?

The Ministry of Industry and Information Technology released the 2019 Communications Industry Statistical Bulletin on February 27, which was much later than the previous releases in 2017 and 2018. Of course, this was most likely affected by factors such as the epidemic. In addition to paying attention to the delay in the release, the communications industry is more concerned about how the three major operators are doing, after all, this is the basis for studying the development trend of the industry.

1. Thanks to the regulators’ call to stop the shopping spree, operators’ revenues are still increasing

After the mixed-ownership reform, China Unicom cooperated with Tencent to launch Tencent King Card in 2017. Since then, the three major operators have competed to launch various unlimited package products (Baidu Sheng Card, Ali Bao Card, etc.) in order to gain competitive advantages. With the strong promotion of speed increase and fee reduction by the regulatory authorities and the enthusiasm of users for the second card slot, the three major operators began to compete to reduce prices and expand sales of unlimited packages. The enthusiasm in the communications market was ignited, and mobile phone users saw a new wave of rapid growth in 2018 after exceeding the total population, and the growth trend continued into 2019.

It can be said that the surge in user DOU in 2018 is related to the increase in speed and the reduction in fees, as well as the large-scale low-price promotion of unlimited packages. However, the ultra-low price of traffic caused by unlimited packages, even below the cost price, directly resulted in no increase in traffic business revenue. Limited by the degree of mutual trust, it is difficult for the three major operators in the communications industry to stop the negative competition of traffic. At this time, the regulators took strong action to push the three major operators to remove unlimited packages and asked them to stop negative marketing.

In fact, after the operators' business trend was close to negative growth, they gradually rebounded from the second half of 2019 and achieved full-year growth. Without the strong intervention of the regulatory authorities, the revenue of the three major operators in 2019 would have been negative. The reason is very simple. Interested readers can infer from the revenue trends of the communications industry announced by the Ministry of Industry and Information Technology in the first and second quarters. With the strong intervention of the regulatory authorities, the operators' revenue has been reversed and increased by 9 billion yuan.

For readers who pay attention to the capital market, there is another good news, that is, the net profit of operators will increase year-on-year with a high probability. According to publicly reported news, China Unicom initially estimated that the net profit attributable to shareholders of listed companies in 2019 was about 4.98 billion yuan, an increase of about 22% year-on-year, but it also expected that the main business income of mobile in 2019 is expected to decrease compared with 2018. The increase and decrease are actually the result of the regulators' strong push for operators to cut marketing expenses on a large scale. Although China Mobile and China Telecom have not yet announced their profit expectations, they are likely to increase.

2. Insufficient revenue growth momentum, new business models are unable to pull the big cart

As a sunset service, the total volume and revenue of voice services have maintained a continuous negative growth trend. Affected by factors such as the slowdown in user growth and the replacement of Internet applications, voice service revenue in 2019 reached 162.2 billion yuan, a decrease of 15.5% from the previous year, and its share in telecommunications service revenue dropped to 12.4%. As the total volume has been getting lower and lower, the scale of voice service reduction has been significantly reduced.

In 2019, mobile Internet access traffic increased by 71.6% year-on-year, and the average monthly mobile Internet traffic per user (DOU) reached 7.82GB/user/month, 1.69 times that of the previous year. In December, the DOU reached 8.59GB/user/month. Although traffic business, as the main source of income, has the largest total volume and the highest proportion, the increase is naturally very limited due to the limited growth rate.

Also benefiting from the regulatory authorities' policy of stopping negative marketing, broadband business has bid farewell to "free giveaway" marketing. While the user scale continues to grow, business revenue has also increased significantly, and it has become the single business with the largest increase. However, at the end of 2019, there was a significant negative growth in fixed-line home broadband users. Although this negative growth was reversed in January 2020, the possibility of negative growth in the future is still very high. After all, the user scale of fixed-line home broadband has exceeded the total number of households in the country.

It is appropriate to summarize the development of SMS business in 2019 as "increase in volume but not in revenue". According to the Ministry of Industry and Information Technology, the continuous penetration of security-related services such as network login and user identity authentication has greatly increased the volume of mobile SMS business. Public data shows that in 2019, the national mobile SMS business volume increased by 37.5% over the previous year, an increase of 23.5 percentage points over the previous year; the mobile SMS business revenue reached 39.2 billion yuan, the same as the previous year. The rapid growth of business volume but the lack of growth in business revenue fully illustrates the current situation and dilemma of operators who are busy in vain, and now this trend has been determined, and it is only a matter of time before it enters the negative growth channel in the future.

We closely cooperate with local governments to accelerate the construction of major projects such as smart cities, actively provide emerging businesses such as the Internet of Things, big data, cloud computing, and artificial intelligence, inject intelligence into the government and empower the industry. Fixed value-added and other businesses have gradually become new driving forces for the development of the industry. IPTV (Internet TV) business revenue was 29.4 billion yuan, an increase of 21.1% over the previous year; Internet of Things business revenue increased by 25.5% over the previous year. Although the revenue growth of new businesses is relatively high, the overall increase is actually very limited.

3. Accelerating the promotion of 5G, China Mobile ranks first in the world

In addition to the conventional situations mentioned above, the most important thing for the communications industry in 2019 is the commercial use of 5G. Although there are problems such as immature technology, low-quality and high-priced mobile terminals, lack of application scenarios, insufficient construction funds, and insufficient operational confidence, under the strong promotion of the regulatory authorities, 5G construction and development have achieved remarkable results.

Data released by the Ministry of Industry and Information Technology show that by the end of 2019, more than 130,000 5G base stations had been built nationwide, and 13.77 million 5G mobile phones had been shipped in the domestic market. Data released by China Mobile show that the total number of 5G base stations it has opened has exceeded 70,000, and by the end of January, its 5G package users had reached 6.73 million. After comparing the 5G situation in South Korea, some communications industry analysts concluded that China Mobile is already the world's largest 5G operator.

"If you walk alone, you will be fast; if you walk together, you will go far." With China Mobile leading the way in the communications industry, friendly competitors China Unicom and China Telecom will not be slow to follow. According to data released by China Telecom, the number of 5G base stations it has opened has exceeded 50,000, and the number of 5G package users has exceeded 8 million. Although China Unicom, which has jointly built 5G with China Telecom, has not yet announced the scale of its 5G package users, the total number of its 5G base stations is comparable to that of China Telecom.

Regarding the construction and development of 5G, two news items about China Radio and Television need to be mentioned here, and the contents of these two news items will accelerate the development of China Radio and Television's 5G. The first news item is: The Ministry of Industry and Information Technology has issued radio frequency use licenses to China Telecom, China Unicom, and China Radio and Television, agreeing that the three companies will jointly use the 3300-3400MHz frequency band for 5G indoor coverage nationwide. The second news item is: The State Administration of Radio and Television held a "Video and Telephone Conference on the Implementation of the National Cable Television Network Integration and Development Implementation Plan" to accelerate the progress of "one network integration" and streamline the corporate governance structure and internal system mechanism for the development of 5G.

Summary In 2019, although the revenue scale and growth rate did not exceed expectations and the operating results were very limited, the communications industry has gathered momentum that is beneficial to the future accelerated development. We believe that the most meaningful of these is the accelerated commercialization of 5G and the cessation of negative marketing. Because only when operators bid farewell to the bloody competition model can they more easily enter the 5G development process.