5G construction brings returns The performance of basic telecom operators has picked up

Source: Economic Daily

According to data from the Ministry of Industry and Information Technology, the three basic telecommunications companies actively develop emerging businesses such as big data, cloud computing, and the Internet of Things, and from January to February this year, a total of 50.8 billion yuan of emerging business revenue was completed, an increase of 34.1% year-on-year. The picture shows China Mobile network construction workers building 5G base stations. (File photo)

A few days ago, the 2021 performance reports of the three major telecom operators in the mainland were all released, showing a collective recovery trend. Overall, in 2021, the three major telecom operators achieved a total revenue of 1.61 trillion yuan and a net profit of about 148.4 billion yuan.

Why did the performance of the three major telecom operators pick up collectively? Experts believe that the new growth points brought by digital transformation services are the first driving force for revenue growth of the three major telecom operators. At the same time, the 5G business also performed well, after the high investment finally ushered in a return.

Outstanding performance

In 2021, the three major telecom operators will perform well. Among them, China Mobile's revenue was 848.3 billion yuan, an increase of 10.4% year-on-year, and net profit was 116.1 billion yuan, an increase of 7.7% year-on-year. China Telecom's revenue was 434.2 billion yuan, an increase of 11.3% year-on-year, and net profit was 26 billion yuan, an increase of 24.4% year-on-year. China Unicom's revenue was 327.9 billion yuan, an increase of 7.9% year-on-year, and its net profit was 6.3 billion yuan, an increase of 14.2% year-on-year.

"Overall, China Mobile is still leading in terms of revenue scale, profit scale and profit margin, while China Telecom and China Unicom have a higher profit growth rate, showing the rapid catch-up of its business level." Liu Xu, general manager of CCID Consulting Digital Economy Industry Research Center, said.

In 2021, a new generation of ICTs will accelerate innovation and push society towards the intelligent digital era. The three major telecom operators actively grasped the strategic opportunities, accelerated the layout of 5G networks, comprehensively promoted digital transformation, and significantly accelerated business development. On August 20, 2021 and January 5, 2022, China Telecom and China Mobile successively returned to A-shares, further promoting the close integration of the capital market and the user market.

In 2021, the development highlights of the three major telecom operators are different. Liu Xu analyzed that China Mobile is the market leader, its highlights are mainly in the expansion of new business areas, in the intelligent networking, home security, mobile cloud, Internet finance and other sub-sectors have achieved more than 100% revenue growth, new business expansion and industrial transformation has achieved practical results. China Telecom and China Unicom are the chasers in the market, and their business highlights are mainly focused on innovating service models, laying out digital integration, expanding end users, and improving the cooperation ecology.

In 2021, Relying on the "Tianyi Cloud", China Telecom comprehensively strengthened the integration of cloud and networks, improved service capabilities, and its terminal and communication equipment sales increased by about 100% over the same period last year, showing its great development in the field of terminal scenario applications. Relying on the "China Unicom Cloud", China Unicom integrates the "Unicom Chain" and artificial intelligence, adheres to integration and openness, and has made remarkable achievements in the field of digital infrastructure construction. In addition, the co-construction and sharing model adopted by China Telecom and China Unicom in the construction of 5G base stations has brought significant economic cost savings, and is also an important highlight of operators' business cooperation and intensive development.

5G construction pays off

Xiang Ligang, chairman of the Information Consumption Alliance, believes that the main reason for the performance improvement of the three major telecom operators in 2021 is the return brought by 5G construction.

In 2021, the 5G services of the three major telecom operators performed well, with the total number of 5G package users reaching 730 million, an increase of 128.1% year-on-year.

In 2021, China Mobile reversed the downward trend in the personal market and achieved positive growth, and 5G returns contributed to it. According to the financial report, in 2021, China Mobile's personal market revenue reached 483.4 billion yuan, an increase of 1.4% year-on-year; mobile customers reached 957 million households, a net increase of 14.97 million, of which 5G package customers reached 387 million, a net increase of 222 million households, the scale remained industry-leading. Driven by customer upgrades to 5G and value growth in converged operations, mobile ARPU (average revenue per user) was RMB48.8, up 3% year-on-year.

From the perspective of 5G investment, in 2021, China Mobile's 5G-related investment totaled 114 billion yuan, with a total of more than 730,000 5G base stations opened, basically achieving continuous coverage of urban areas, counties, and townships, good coverage of some key areas, developed rural areas, and key property venues, serving 207 million 5G network customers, and ranking first in the world in terms of 5G network scale and customer scale. China Telecom completed a 5G investment of 38 billion yuan to promote the co-construction and sharing of China Unicom's network, with the number of 5G base stations in use reaching 690,000 stations, and the 5G network covers all cities and counties in the country and some developed townships. China Unicom completed a 5G investment of 32.05 billion yuan.

Yang Jie, chairman of China Mobile, said at the performance conference that 2020 to 2022 is the peak of 5G investment, and from next year, China Mobile's 5G investment will no longer grow and show a gradual downward trend.

"At present, the replacement of 5G for 4G is underway, and users will also replace communication packages after replacing mobile phones, so the performance of the three major telecom operators has shown an upward momentum." In addition, the three major telecom operators are also preparing for the Interconnection of Everything in the 5G era, and the number of connected items in the 5G era will soar, no longer limited to smart phones, PCs, etc., more consumer electronic products and smart homes, car networking devices, etc. will be connected to the 5G network, thus creating a new service increment for the three major telecom operators. Pan Helin, co-director and researcher of the Digital Economy and Financial Innovation Research Center of the International United Business School of Zhejiang University, said.

Emerging business highlights are plentiful

Liu Xu believes that the current 5G service is mainly an adjustment to the stock of the original 4G service, and the contribution to the overall revenue of telecom operators is limited. In contrast, digital transformation and related services are the real starting point for the performance improvement of the three major telecom operators in 2021.

"Telecom operators have shifted from focusing on tariff growth to paying more attention to application landing. For example, the most important thing in the current 5G construction is to develop new applications and incorporate more devices into the 5G network, and after these application scenarios are landed, they will bring new business growth points. In the past, telecom operators paid more attention to relying on traffic and tariff growth to drive performance growth. Pan and Lin said.

China Mobile's financial report shows that in 2021, the company's digital transformation revenue reached 159.4 billion yuan, an increase of 26.3% year-on-year, and the incremental contribution to communication service revenue reached 59.5%, which is the first driving force to promote the growth of China Mobile's revenue. Overall, the "second curve" of digital transformation revenue is leading China Mobile to open up a broader market space in the blue ocean of information services.

"The three telecom operators have different digital transformation priorities." Liu Xu analyzed that in 2021, China Mobile's digital transformation business represented by smart home, government and enterprise DICT, Internet of Things, private network and emerging market business grew rapidly, contributing 41.5% to the overall revenue growth. China Telecom's high contribution to industrial digital service revenue shows its active expansion of services such as Internet data centers, cloud services, and digital platforms. The growth of China Unicom's revenue scale was mainly due to the substantial increase in data and other Internet application revenue (26.9%), and its growth contributed 53.8% to the overall revenue.

For the next development focus, China Mobile said that it will make every effort to promote the layout of new information infrastructure focusing on "5G + computing network + smart middle office" to help strengthen, optimize and expand the digital economy. China Telecom proposed that in 2022, the proportion of industrial digital investment will reach 30%, close to the proportion of 5G network investment. China Unicom said that in 2022, it will increase investment in "counting the east and counting the west".