Will the difficulties faced by the communications industry continue in 2019?

Even though this topic is a bit heavy, as researchers in the communications industry, it is necessary for us to analyze the situation and call on regulators to pay appropriate attention and treatment.

Because the communication industry in some provinces, cities and districts has experienced negative revenue growth in 2018. Although the data released by the Ministry of Industry and Information Technology shows that the growth of the communication industry's business revenue in the first 11 months of this year is still positive, more data has indirectly confirmed that the communication business revenue of some provinces, cities and districts has entered a negative growth channel.

So, under the premise that the 2C dividend disappears and the speed increase and fee reduction will continue in 2019, can the revenue growth trend of the communications industry be reversed and rebound? Can the list of provinces, cities and districts with negative revenue growth be reduced accordingly?

We believe that many people who care about the communications industry will have similar questions.

1F The year-on-year growth of the communications industry's revenue continued to decline, and user growth slowed significantly

We can get the conclusion shown in the title directly from the data published on the website of the Ministry of Industry and Information Technology. From January to November 2018, the total revenue of telecommunications business reached 1,198.1 billion yuan, a year-on-year increase of 2.9%, and the growth rate increased by 0.2 percentage points compared with January to October; the total volume of telecommunications business reached 5,784.4 billion yuan, a year-on-year increase of 139.2%, and the growth rate fell by 0.6 percentage points compared with January to October. If we consider the premise that the cumulative net growth of mobile users, broadband users and IPTV users in the first eleven months exceeded 141 million, 56.74 million and 31.14 million respectively, then the scale of revenue obtained by the communications industry through attracting new users is also very large.

Therefore, if the revenue growth factor brought by net user growth is excluded, the communications industry's revenue in 2018 will most likely experience a dismal negative growth.

The mouth of the communications industry's volume-revenue scissors is constantly expanding. If it continues to extend downward, even if it does not fall into overall negative growth, the number of provinces, cities and districts entering negative growth will gradually increase.

The "card slot" concept in 2018 artificially spawned a wave of mobile phone users, directly causing the number of mobile phone users to exceed the total population of the country. If no new concept emerges in 2019 to drive a similar explosive net increase in user scale as in 2018, then even without speed increases and fee reductions, the revenue growth of the communications industry will face very great pressure.

The reason is very simple, that is, if operators cannot create and provide new value for users, then users will not be able to contribute revenue to operators.

In addition, 2019 will be the first year of 5G commercialization. Operators must increase investment in 5G construction, and the funds used for incremental user development may be greatly reduced, not to mention the large amount of marketing costs that must be occupied to maintain the existing large number of existing users. The operator's previous model of relying on large marketing investments to drive user growth is even more unsustainable. In this case, it is hard to talk about user growth.

After the 2F speed increase and fee reduction are implemented, the red envelopes in the communications industry will continue to be distributed

On December 27-28 last year, the National Industrial and Information Technology Work Conference was held in Beijing. According to the news media, the conference made it clear that "in 2019, we will continue to carry out network speed increase and fee reduction, launch the broadband network "double G double increase, same network and same speed" action, accelerate the promotion of fixed broadband gigabit applications, do a good job in accurately reducing fees for registered poor households and small and medium-sized enterprises, and promote a substantial reduction in roaming fees between the mainland and Hong Kong and Macao."

There is no doubt that under these clear regulatory policy requirements, operators who have always been politically conscious must resolutely implement them.

However, the speed increase and fee reduction policy that started in 2015 has been in place for four years. In the past four years, operators have vigorously carried out fee reduction work, and the effect is very obvious. The regulatory authorities' notifications and various official reports from operators have repeatedly mentioned that the fee reduction has been close to 90% year-on-year, and in order to achieve the network construction goal of "speeding up + widening", operators have spared no effort to increase investment.

With the joint efforts of all parties in the communications industry, the National Industrial and Information Technology Work Conference Report shows that my country's universal telecommunications service has completed the "13th Five-Year Plan" goal ahead of schedule, with the proportion of administrative villages with optical fiber access increased to 98%, and the proportion of poor villages with broadband access reaching 95%. Data from the Ministry of Industry and Information Technology's website also shows that my country's mobile phone penetration rate has reached 112.2 per 100 people, the mobile broadband penetration rate exceeds 83%, and fixed broadband access users of 100Mbps and above account for more than 65%.

How big the 2019 speed increase and fee reduction bonus will be may be revealed around the first quarter. According to the regulators, both sides of the hand are flesh, and requiring the communications industry to release water to support the development of other industries will eventually benefit the communications industry itself by reducing the total social cost. For the majority of users, the bigger the bonus from the communications industry, the better, and the more benefits, the better.

However, operators in the communications industry have to face the problem of continuously shrinking production space.

In the post-4G era, it is impossible for operators to innovate new businesses that can quickly drive revenue growth. No matter how they maneuver or what new tricks they invent, as long as they cannot create new value for users, users will definitely not pay for the operators.

Therefore, we speculate that even if the various regulatory policies in 2019 do not lead to negative revenue growth in the communications industry, the communications industry’s hope of reversing the downward trend in revenue will be extremely slim.

3F The community of shared destiny in the communications industry needs to be established urgently

The speed increase and fee reduction policy has indeed stimulated the development of industries related to the communications industry. The requirement of speed increase and fee reduction has forced operators to passively reduce fees, which has had a significant impact on the revenue of the communications industry. However, the disorderly competition within the communications industry to compete for users has pushed the fee reduction to an extreme, so that the fee reduction range far exceeds the rigid indicators of the regulatory authorities, which ultimately directly leads to a rapid and substantial decline in revenue.

Of course, the reason why the operators as a whole are turning the knife inward is largely related to the performance assessment from the regulators. However, the regulators' ever-increasing assessments are also based on the over-fulfillment rate of industry communications companies. So, from this perspective, the operators are actually constantly pulling the rope tied around their necks.

Since the situation is already like this, there is no need for anyone to complain. For operators as a whole, it is becoming increasingly necessary and more and more realistic to establish a community of shared destiny in the communications industry. China Mobile cannot dominate alone, and China Unicom and China Telecom cannot disappear without reason.

Therefore, the competitive and cooperative relationship between operators needs to be optimized to meet regulatory requirements, and it is urgent to transition from zero-sum competition to building a community with a shared future. No matter who is in charge of this job, the healthy and sustainable development of the communications industry is everyone's common responsibility. We naturally believe that no one wants the multi-bone effect of negative revenue growth in the communications industry to continue to expand.

The communications industry is not a big industry, and the number of big players that can be accommodated is unlikely to increase. If the industry cannot face up to and solve the problems that occurred in 2018, the list of companies with negative revenue growth in 2019 will continue to expand, even if everyone does not want to see this happen.