The turning point has arrived, and operators will face major changes in 2019

According to the financial report, China Telecom's operating income in the first half of the year reached 190.488 billion yuan (RMB, the same below), and its net profit was 13.909 billion yuan, up 2.5% from the same period last year.

So far, the first half financial reports of the three major domestic operators have been released. The data comparison is as follows:

Overall, the revenue of the three major operators has declined slightly.

In terms of net profit, each company has both good and bad news. China Mobile's net profit has declined significantly. As we all know, China Mobile's net profit is several times the sum of the other two companies, so this absolute value is still quite large, which once caused a sensation in the industry.

[[274803]]

Let’s compare the user development of the three operators.

As shown in the following figure:

In terms of user growth, China Telecom's mobile user base has increased significantly. One out of every two new mobile users is from China Telecom. China Mobile's fixed broadband user base has also increased significantly. Among the net new users in the first half of the year, China Mobile accounted for 72.4%.

Although the number of users has increased, overall, the total number of new mobile users of the three major operators in the first half of this year has dropped significantly. Among them, China Mobile's net increase in mobile users in the first half of this year was 9.98 million, a sharp drop of 46.4% from 18.61 million last year. China Unicom was even worse, with a net increase of 47.8% year-on-year.

According to the data from the operators, the 4G user penetration rates of China Mobile, China Unicom and China Telecom are currently 78.5%, 73.8% and 82.0% respectively, which are approaching saturation. The era of substantial growth in 4G users has come to an end. The era of substantial growth in mobile phone users has also come to an end.

The above is the latest situation of the three major operators. In short, there are few bright spots and many hidden worries.

[[274804]]

Cancelling "unlimited data packages" and "4G speed limits", what happened to the operators?

Recently, various news and rumors about operators have been coming one after another.

First, the three major operators successively cancelled the "unlimited data packages", and then, rumors of "4G speed limit" leaked.

The vast majority of users who don't know what's going on inevitably have great confusion and doubts -

"Operator, what the hell are you doing?"

In fact, to put it bluntly, the operators have no money.

The country's policy of increasing speed and reducing fees, coupled with increasingly fierce market competition, has resulted in operators earning less and less revenue from traffic while facing increasing service pressure.

Relevant data shows that in March 2018, the average monthly traffic usage per person in China was 3G. By the end of 2018, it had reached 6G. The latest data seems to be 9GB per person per month (unconfirmed). The rapid growth momentum is staggering.

Everyone should know the main reasons for the substantial increase in per capita data traffic. On the one hand, it is because operators vigorously promote "unlimited data packages" and on the other hand, too many targeted free data cards such as "Dawang Card" are sold. The more important reason behind this is the brutal and outrageous competition among peers.

[[274805]]

The rapid growth of user traffic has brought tremendous pressure to the existing networks of operators. The number of base stations is seriously insufficient, and transmission resources are seriously insufficient. Users' perception of network quality has obviously declined. I believe everyone has the same experience.

The fundamental reason for the "4G speed limit" that has been hotly discussed these days actually lies here.

I personally do not believe that operators will implement nationwide speed limits. On the one hand, this runs counter to the national policy of "speeding up and reducing fees", and the government has a heavy responsibility. On the other hand, if such speed limits are implemented, once users find out, it will arouse intense emotional backlash. (Secretly changing the speed without telling users? It is impossible anyway.)

However, it is possible that some local operators, unable to bear the pressure of network operation, secretly limit the speed. I think the pictures leaked online may be the case.

The rumor that 4G is "speed-limited" is a jargon, but it's hard to verify whether it's true or not

If speed limit is impossible, then we can only cancel the "unlimited traffic package" to reduce traffic pressure.

Xiaozaojun has repeatedly said before that the current 4G LTE network of operators is a very important basic network. 5G and 4G are not replacements in the short term. Operators will not remove a large number of 4G base stations due to the increase of 5G base stations.

On the contrary, operators will pay more attention to the construction of 4G networks to serve functions such as VoLTE and VoNR (voice calls), and withdraw 2G and 3G networks as soon as possible.

I personally predict that 4G LTE will last at least 10 years and will be with us for a long time. Operators should focus on building 4G, and we should also trust 4G.

In fact, Xiaozaojun thinks that whether it is the cancellation of the "unlimited data package" or the unconfirmed "4G speed limit", the biggest problem is that the attitudes and actions of the three operators are unprecedentedly consistent. This is actually more worthy of attention, and there is a suspicion of a "monopoly alliance".

If the operators continue to maintain the previous open competition, we as consumers will have nothing to worry about. Don't forget that by the end of this year, the nationwide "number portability" will be realized, and no operator dares to mess around at this time.

The cancellation of the "unlimited data package" is an important turning point signal

For operators, 2019 is likely to be a critical turning point. Traffic revenue will continue to decline in the future, and the future competition will be more about the profitability of new businesses and cost control capabilities.

In terms of new business, the focus is on the growth of B-side users, that is, government and enterprise users. China Unicom has made significant progress in this regard in the first half of this year: the revenue of industrial Internet business increased by 43% year-on-year to RMB 16.7 billion. The previous structural adjustment of China Mobile (splitting the government and enterprise customer branch) was also based on this consideration and is actively being deployed.

Cloud computing, big data, and the Internet of Things are the key business directions for operators in the future. Industry Internet is also an important source of income for operators in the future. Whoever opens up this market first will be able to establish the initiative in the competition in the next few decades, just like when China Mobile established an absolute leading advantage in the rise of mobile phone business.

Operators have also begun to pay attention to cost control.

For example, Xiaozaojun chatted with a friend from an operator. It is said that the air conditioners in the operator's computer room are now adjusted to the exact temperature, and they are adjusted up one degree at a time until the critical value at which the equipment does not have any problems. In the past, they were directly set to the lowest temperature and blown wide open. In addition, the grassroots employees of the operator now also emphasize the integration of skills. Often one person takes on multiple job functions. Some work that was previously done by third parties is now assigned to their own employees. This shows the strength and determination of cost saving.

For operators, the bigger challenge comes from 5G.

According to the plans of the three major operators, the investment in 5G can reach up to 34.2 billion yuan in 2019. China Mobile plans to invest 17.2 billion yuan this year, China Unicom plans to invest 6 billion to 8 billion yuan, and China Telecom plans to invest 9 billion yuan.

These are just the initial investments of the three major operators in 5G. In the future, with the deployment of SA (independent networking) networks, investments will increase further.

Not long ago, Wang Xiaochu, chairman of China Unicom, said at a mid-term performance conference that Unicom may not build 5G in all places in the future. Unicom will either cooperate with China Telecom to build and share, and operate separately, or cooperate with China Mobile in roaming mode.

[[274806]]

After this statement was made, the investment community's expectations for the total amount of 5G investment dropped significantly. Industry companies and investors were all sighing.

A few days ago, China Telecom also made a similar statement, saying that it would cooperate with China Unicom in 5G network construction.

If this is true, then the competitive landscape of China's telecommunications industry will undergo earth-shaking changes.

In short, the "post-operator era" has arrived. Challenges are also opportunities, and it is easier to overtake others. Only those who can carry out reforms to the end, truly activate innovation capabilities, implement refined management, and provide the best customer service can break through the siege and have the last laugh.

Who will be the king of the new era? Let us wait and see!