Dr. Peng's "Midlife Crisis"

In 2011, Dr. Peng said that "the goal of the Internet access business is to move towards the largest private fixed network provider in China." Today, 10 years later, the 36-year-old "doctor" was not only forced to abandon his once proud broadband business, but also ushered in his own "mid-life crisis".

In July, credit rating agency And Credit Ratings adjusted Dr. Peng's rating outlook to negative. On December 17, the Shanghai Stock Exchange issued a regulatory work letter to Dr. Peng due to the pledge of the company's equity by a number of Dr. Peng's controlling shareholders.

In fact, this is Dr. Peng's sixth stock pledge rollover announcement since the first stock pledge rollover announcement was issued in 2020. What was once the "largest private broadband operator" is now so bleak that Dr. Peng's situation is not bleak.

01 High open low go decade

Founded in 1985, Dr. Peng's initial main business was not the telecommunications industry but special steel smelting, in 2007 through the acquisition of the original Beijing Telecom, began to turn to the field of Internet value-added services, and in 2011 after the acquisition of Great Wall Broadband gradually reached its peak, won the title of "the largest private broadband operator".

According to public information, in the first year of Dr. Peng's acquisition of Great Wall Broadband, Great Wall Broadband achieved cash receipts of 2.678 billion yuan and net profit of 188 million yuan in the whole year, covering 20.87 million users. In the same year, Dr. Peng's net profit also increased by 32% year-on-year.

However, behind the seemingly win-win results, there are also many hidden risks, which also lays the groundwork for Dr. Peng's business difficulties today.

It should be noted that Dr. Peng had been saddled with many legal cases when he acquired Great Wall Broadband, and as of August 31, 2012, the net assets of Great Wall Broadband were -113.7235 million yuan, and the asset-liability ratio reached 104.18%. Even so, Dr. Peng still chose to acquire Great Wall Broadband at a high premium of about 7 times.

After the high-priced acquisition of Great Wall Broadband, Dr. Peng, who tasted the sweetness, began a busy "acquisition journey" to carry out the so-called diversified layout.

According to public information, in recent years, Dr. Peng has successively laid out a number of fields including set-top boxes, blockchain, education, and even invested heavily in building a submarine cable with Facebook and Google that directly connects Hong Kong and Los Angeles. It is reported that the project has completed all construction in October 2020, but it has not been put into use for many reasons.

Under the frequent expansion, Dr. Peng's debt pressure has increased rapidly, and the data shows that Dr. Peng's asset-liability ratio has risen from 68.85% in 2017 to 94.84% in 2019, and as of March 31, 2021, the liabilities have exceeded 10 billion, reaching 11.591 billion.

At the same time as the crazy expansion, a time bomb that will lead to the collapse of the entire private broadband "business empire" in the future has also been placed.

In 2012, the Ministry of Industry and Information Technology encouraged operators to implement speed-up and fee reduction according to the situation. Three years later, with the release and implementation of corresponding policies, the three major operators quickly responded, and the acceleration and fee reduction action accelerated. As of 2018, the average domestic broadband tariff was only 0.49 yuan / M (5.9 yuan / M in 2014).

The fee reduction measures of basic service providers have further explored the prices of private broadband enterprises such as Great Wall Broadband, and the profit decline has been serious. At the same time, due to the opening of the price war by China Mobile, which joined the broadband war around 2016, in order to maintain the source of customers, Great Wall Broadband still needs to maintain a low product price, which further leads to a geometric increase in the operating costs of enterprises.

According to the financial report, the net profit of Great Wall Broadband in 2015 was 324 million, in 2016 it has fallen to 284 million, in 2017 it was almost waist cut, only 160 million, by 2018 Great Wall Broadband has turned a profit into a loss, a net loss of 186 million yuan, down 216% year-on-year, broadband business has changed from Dr. Peng's "revenue core" to the biggest "burden".

In the end, in order to alleviate the high debt pressure of Dr. Peng's nearly 3 billion yuan, the Great Wall broadband business, as a heavy asset operation, naturally went to the fate of "being transferred". However, the final price of Great Wall Broadband, which has a high price of 1.8 billion yuan, is only 1 million, which is really regrettable.

Dr. Peng's latest financial report for the third quarter of 2021 shows that Dr. Peng currently has debts of about 9.277 billion yuan, and the net profit attributable to the shareholders of the listed company in the third quarter fell by nearly 100% (95.36%) compared with the same period last year, and raised more than 2 billion yuan at the beginning of this year to repay the debt.

It is not difficult to find that Dr. Peng's brilliant moment has long passed.

02 obstacles and long future

At the end of 2019, Dr. Peng reached a cooperation with China Unicom to assign all the customer ownership rights of Great Wall Broadband to China Unicom, which provided services and operations, and Dr. Peng was transformed into a channel agent and service provider of China Unicom's Beijing branch.

This means that Great Wall Broadband has completely cut off Dr. Peng, and in the future, Dr. Peng will only be responsible for selling the corresponding broadband services and daily maintenance work for China Unicom, as well as the Internet access services in Beijing, Shanghai and Shenzhen.

In the 2019 annual report, Dr. Peng once said that "it will transform from a traditional network operator to a corporate home Internet service provider, while vigorously developing cloud computing and big data business, will transform into a communication service provider, and continue to take the asset-light operation route." ”

But in 2019, Dr. Peng put away his big data center. In June this year, Dr. Peng transferred all the assets, liabilities and related businesses involved in its five data center asset groups and four data centers to Shenzhen Baoneng for 1.65 billion yuan.

In fact, Dr. Peng's sale of the data center industry is really helpless.

With the new infrastructure becoming the industry outlet more and more voices, and the value of data in the era of big data to further improve, the value of data is self-evident, the data center may provide profits and revenue in the future is more worthy of attention, and even the future may be Dr. Peng's most ideal second curve, the business gross profit margin was once as high as 50%.

But even so, subject to excessive debt pressure, Dr. Peng can only choose to survive with a broken arm and give up the "fragrant food" of the data center.

Since then, the new model chosen by Dr. Peng does not seem to be optimistic.

In 2020, Dr. Peng said that with the strategic direction of "enterprise and home Internet service providers", we will exert efforts to provide smart cloud network services and improve the company's core competitiveness. ”

According to the previously released 2021 semi-annual report, Dr. Peng's main business totals 4 categories, namely: home broadband and value-added services, smart cloud network services, data center services and overseas services, and others. Among the four major business segments, the operating income of one and only one of the smart cloud networks increased compared with the same period last year, and the other three declined to varying degrees.

The only thing that has risen in performance is also a business that Dr. Peng attaches great importance to, the smart cloud network business, with operating income increasing by 143% year-on-year compared with the same period last year. However, it should be noted that the cost of a 143.71% increase in operating income year-on-year is a 363.8% increase in operating costs year-on-year, which directly leads to a decline of more than 70% of the gross profit margin of Dr. Peng's smart cloud network business compared with last year, and the gross profit margin is only 14.53%.

According to the financial report of the first quarter of 2021, the business has led to a decline in the comprehensive gross profit margin level of the company's main business to 31.61%.

At the same time as the gross profit margin declined, Dr. Peng chose to focus on the development of the so-called smart cloud network business, which will undoubtedly directly clash with major Internet vendors.

Previously, Dr. Peng said that he had reached a cooperation with Alibaba Cloud, but the business community had no eternal friends but only eternal interests, not to mention that in the cooperation between Dr. Peng and Alibaba Cloud, Dr. Peng must be the relatively weak party. And in the industry, there are a series of SaaS-focused companies such as Yonyou, Kingdee, youzan and so on, and Dr. Peng's pressure is not small.

Today, the 36-year-old Dr. Peng, like the submarine cable project he invested heavily in his early years, has not yet found a suitable solution in the commercial war.

Its future, like a confused middle-aged man, faces the sense of urgency brought about by the "mid-life crisis", and the future is full of uncertainty.