Can 5G save operators from negative growth at the beginning of the year?

Although work has not yet been fully resumed, the three major operators have announced their operating data for the beginning of 2020 as scheduled. Except for China Unicom's farewell to the "double decline" of users that lasted for several months and China Telecom's continuous negative growth in fixed-line broadband, the other situations are basically in line with everyone's expectations.

1. The scale of mobile phone users may officially start to decline

The number of mobile phone users of the three major operators has exceeded 1.6 billion, far exceeding the total population of 1.4 billion in China. In fact, after breaking through the population size limit, mobile phone users have maintained sustained positive growth for many years. According to the latest data released by the Ministry of Industry and Information Technology, as of November 2019, the mobile phone penetration rate has reached 114.7 units per 100 people, and this figure has increased by 2.5 units per 100 people in 2019.

How the total number of mobile phone users will trend in the future is bound to be a focus of much attention. The data at the beginning of 2020 may provide a basis for everyone to make a judgment, that is, with the entry of 5G, those users with two or even multiple SIM cards due to unlimited data traffic are likely to automatically quit and become single-SIM users. A very important reason for this is that the capacity of 5G packages is much higher than that of 4G packages.

Of course, for China Unicom, compared with China Mobile and China Telecom, it is likely that it has already been in the vortex of negative growth in mobile phone users. Because from October 2019 to January this year, China Unicom's mobile phone users have experienced negative growth for four consecutive months, and after 5G has gradually become the focus of development, it has become increasingly difficult to buck the trend.

2. 4G users will inevitably accelerate their migration to 5G package users

It has only been about three and a half months since the three major operators simultaneously announced 5G packages and officially started selling them in early November 2019. In this year's opening business report, China Mobile directly announced that its 5G package users as of the end of January were 6.73 million. At the 2020 Terminal Ecosystem Cooperation Promotion Conference held on January 15, China Telecom announced that the number of 5G packages had exceeded 8 million.

Although China Unicom has not yet announced the number of its 5G package users, we believe that its 5G package users have already exceeded 2 million (public data shows that as of around 9:30 am on October 9, 2019, the number of 5G pre-booked users of China Mobile, China Unicom, and China Telecom reached 5.9226 million, 2.0033 million, and 2.0784 million, respectively).

There is no doubt that 2019 is the first year of 5G development, and 2020 will be the year of great development of 5G, which includes large-scale construction of network hardware such as 5G base stations, as well as a rapid increase in the scale of users. In fact, according to the 5G user development goals announced by the three major operators, by the end of 2020, my country's 5G users will exceed 200 million.

In this case, a large number of 4G users will inevitably migrate to 5G users, which means that in the future, with the rapid growth of 5G users, the scale of 4G users will inevitably show a continuous downward trend. The negative growth at the beginning of this year may be the official beginning of this negative growth.

3. The epidemic may stimulate large-scale 5G application innovation

The outbreak at the beginning of the year was undoubtedly a disaster, but in the process of responding to the disaster, various applications based on 5G technology, including telemedicine, teleeducation, remote live broadcast, and remote temperature measurement, are gradually accelerating to the fore. More noteworthy is that in the process of "fighting the epidemic", all walks of life have a deeper understanding and recognition of the value of 5G.

5G has the characteristics of greater bandwidth, higher speed, lower latency, and greater connections. It can support three major scenarios: enhanced mobile broadband, ultra-high reliability and low latency, and massive connections. 5G is deeply integrated with various fields of the economy and society, and will give birth to emerging information products and services. In this "anti-epidemic", 5G has enabled industries such as medical care, education, and emergency response.

In fact, in addition to the fact that these specific applications of 5G have attracted attention from all walks of life, the top level has also clearly issued instructions to accelerate the application of 5G, and this instruction will surely be actively promoted by the regulatory authorities and will inevitably receive a positive response from the four major 5G operators including China Mobile.

In the future, 5G will empower smart factories to improve work efficiency and accelerate the replacement of manual labor. In addition to directly empowering the 2B field, 5G will further continue the 2C trend of the 4G era and extend the service target from individuals to communities, directly empowering the construction of smart communities, so as to accelerate the governance system and governance capabilities to take root in the end of society.

4. Cost-effective 5G terminals after the epidemic may ignite 5G enthusiasm

Under the NSA standard, 5G will mainly serve individual users. In addition to various CPE applications, the final scenario is enhanced mobile broadband (eMBB). Therefore, with 5G packages already on sale at various discounts, cost-effective 5G terminals have become a bottleneck restricting the rapid growth of 5G users.

Due to the demand for 5G replacement, the mobile terminal market has shown a negative growth trend in 2019. Market research firm IDC pointed out that in the fourth quarter of 2019, China's smartphone market shipments were about 86.2 million units, a year-on-year decrease of 15.6%; in 2019, China's overall smartphone market shipments were about 370 million units, a year-on-year decrease of 7.5%.

In addition to the delay in 5G replacement demand due to the lack of cost-effective terminals, the epidemic at the beginning of this year inevitably affected the market trend of 5G mobile terminals. The Spring Festival holiday, which should have been a peak sales season, encountered a "cold market", which has had a huge negative impact on the mobile terminal market.

According to IDC's forecast, affected by the epidemic, the domestic overall market from January to February will face a sharp decline of about 40% year-on-year. Only after the epidemic is under stable control will the overall mobile terminal market gradually enter a recovery period, but it will still be difficult to recover to the same period last year. It is expected that the domestic market will experience a year-on-year decline of more than 30% in the first quarter.

Of course, IDC also gave an optimistic forecast for 2020, that is, from the perspective of the whole year, as the impact of the epidemic gradually subsides, the market demand will begin to be released after the product rhythm returns to normal, and the market is expected to rebound in the second quarter and the second half of the year. It is estimated that the domestic mobile phone market will decline by about 4% year-on-year in 2020. This means that after the epidemic is over, high-cost-effective mobile phone terminals represented by 5G will most likely detonate the entire market.

5. China Mobile’s 5G development path deserves attention

Recently, a senior leader of China Mobile announced that the number of its 5G base stations is 74,000, maintaining its leading position among the four major 5G operators in China. In fact, China Mobile has the largest number of 5G base stations in the world, surpassing the number of 5G base stations of South Korean operator KT.

In addition to its global leading advantage in 5G network scale, China Mobile has also become the world's largest 5G user. Data released by the head of China Mobile's market operations department on January 10 showed that 3.8 million 5G mobile phones were activated on its network and 3.02 million package users. As of January 31, China Mobile's 5G package users soared to the aforementioned 6.736 million.

In the face of the advantages in network and user scale that it has achieved in 2019 and early 2020, China Mobile has continued its pragmatic style. A netizen from the Communication Home revealed that China Mobile's 5G base station construction target in 2020 is 340,000. Although this number is far from the millions of scale in the early stage of 4G, considering that the SA standard of 5G will not mature until the end of 2020, the construction scale of 340,000 is still worthy of praise.

Due to the impact of the epidemic, measures such as extending the Spring Festival holiday and delaying the return to work will inevitably have a negative impact on the entire macro-economy, including the communications industry. However, normal economic behavior that has been suppressed will also rebound strongly after the epidemic ends. Based on this expectation, we believe that the performance of 5G in 2020 is worth looking forward to.