Operators' user development under severe cold weather, some are happy while others are sad

It is time for operators to release their monthly operating reports. On July 19, China Mobile and China Unicom released their monthly reports. As the revenue growth of the communications industry is declining, operators are experiencing mixed results in terms of user development.

1. China Unicom's mobile phone users continue to grow at a slow pace

The number of mobile phone users increased slightly by 24,000, lower than the slight increase of 57,000 last month. Although it is still positive growth, there has been a cliff-like downward trend. It is hard to say whether this trend can be reversed in the future. After all, the number of mobile phone users has far exceeded the total population, and the data reported by the Ministry of Industry and Information Technology has also shown negative growth for two consecutive months.

4G users continued to grow at a high rate in the early stage, and the overall trend remained positive. Although the total net increase and market share were not as good as those of its competitors, unlike China Mobile's brief negative growth, China Unicom's 4G user development trend was relatively stable.

However, for China Unicom, the scale of mobile phone users is about to be surpassed by China Telecom, which we think is its biggest worry. Since 2018, China Telecom has maintained a continuous high growth rate for more than one and a half years in the mobile phone market. According to the current trend, the scale of China Unicom's mobile phone users will be surpassed by China Telecom in the third quarter of this year.

As a result, even if China Unicom's 4G users maintain a steady growth, it will have to face the embarrassing situation of being the third in the industry. This will not only affect China Unicom's position in the industry, but also its performance in the capital market.

2. China Mobile continues to enhance user value to support positive revenue growth

After two consecutive months of slow growth, China Mobile's mobile phone users finally resumed their previous high growth in June. Whether this trend can be maintained in the future remains a mystery. After all, the industry is no longer in an era where new additions are needed to increase momentum.

Around April last year, China Mobile's net increase in 4G users showed a significant negative growth, and this year it is the same. Although China Mobile's 4G users maintained the first place in net increase in 2018, it remains to be seen whether it can repeat last year's trend this year. However, judging from the data in June, China Mobile's net increase in 4G users has reached an annual high in the industry.

Compared with competitors struggling with scale and market share, China Mobile, which occupies half of the market in terms of total volume and market share, is more concerned about improving user value. Because the first quarter financial report shows that both revenue and net profit of China Mobile have experienced significant negative growth.

After analyzing from the three perspectives of revenue, net profit and user value, if the developed users cannot bring the expected revenue contribution, then the value of these users will not be reflected. For China Mobile, it is now urgent to reproduce the revenue organization path from users to business and then to revenue.

3. China Telecom continues to strive to improve its position in the industry

Although China Telecom has not yet released its monthly operating report for June, we believe that China Telecom's data will not be too bad based on its rapid and relatively stable development since the beginning of this year. As for the reasons why China Telecom can maintain such rapid growth, we think there are many reasons. As for whether it is the natural result of normal development, we cannot conclude. However, there is the following fact that we can give you some food for thought.

In the middle of last year, China Telecom surpassed China Unicom in terms of 4G users and ranked second in the industry. The gap between China Telecom and China Unicom in terms of mobile phone user scale has been getting smaller and smaller, and China Telecom is likely to surpass China Unicom in the third quarter and become the real second in the industry. Therefore, even if the new users cannot bring the expected benefits, China Telecom will probably grit its teeth and achieve the goal of rising in ranking.

In the process of catching up with the scale of users and industry status, China Telecom must not only maintain its already established position advantage but also achieve the goal of surpassing others. The momentum in user development must not be weakened in the slightest, even if it means giving up the requirements for revenue indicators in the short term. Therefore, China Telecom's operation is logical.

4. What is the reason for continuing to spare no effort in new investment?

Judging from the conventional practices of operators in the past, to a large extent, the new market share determines the revenue growth space. Because the demographic dividend of the communications industry was far from reaching its peak at that time, the impact of speed increase and fee reduction was far less than it is today.

After the communications industry entered the stage of stock competition, operators continued to invest in new markets. There may be many reasons for this, but we believe there are three main reasons:

New additions more or less represent user choices. Ideally, users' natural choices represent more recognition of products and services. Although in a competitive environment, this choice of users may be somewhat distorted, no operator dares to give up the fight for user wishes. This is because everyone's thinking logic has not changed because of the entry into the era of stock competition, and users' herd mentality has not changed because of the changes in the times.

Various agents need to be maintained through new remuneration. A hero needs three helpers, and operators have a deep understanding of this. China Mobile once achieved great success with fewer staff than its competitors, and the contribution of agents was absolutely crucial. Agent loyalty was once an internal assessment and notification indicator of operators, especially the exclusive agent situation. Making money is of course the only reason for agents to embrace operators. Therefore, for agents, whether they can make money is also reflected in the new scale and share of development to a certain extent.

To hedge against the impact of the number portability that is about to be fully implemented. Although this reason seems far-fetched, it may be a very realistic reason. Most of the new users that operators are developing now are dual-card or even multi-card users. After the full implementation of number portability, whether users can stay in the network and how it will affect users' choice of number portability have long been issues that operators have been deeply studying. Before various issues are truly studied, expanding the user base has become an inevitable and helpless choice.

Although everyone has long known that the communications industry has been accelerating its transformation from scale competition to value competition based on scale, the understanding of scale may not be consistent. The choice and attitude towards user development, even if there are various frustrations, has become a reality that operators have to face in the post-4G era, and it is also the root cause of some joy and some sorrow.