Picture recording @ Visual China
Wen | old solution
The 2021 annual results of the three major operators were announced, which was particularly beautiful compared with previous years - China Mobile's operating revenue growth reached a 10-year high, China Telecom achieved double-digit growth in revenue and profit, and China Unicom's service revenue growth hit a new 8-year high.
This is also the best revenue performance achieved by the three major operators since the commercial use of 4G in 2013, China Mobile's revenue scale exceeded 800 billion yuan for the first time, China Telecom crossed the threshold of 400 billion, and China Unicom also took a step forward on the basis of 300 billion.
2021 is the second year of 5G commercial release, in just two years the three major operators have developed 730 million 5G package users, far exceeding the development speed of 4G users that year (2013-2015, 4G user scale totaled 410 million), the industry also generally believes that the development of 5G in China ushered in a "dividend period", then, the three major operators This round of high growth is mainly from 5G?
5G subscribers increased but did not increase revenue year-on-year
Through the financial reports of the three major operators and the specific analysis of their revenue structure changes in 2021, it can be seen that although 5G package users have grown rapidly, the contribution to the performance growth of operators is far less than expected.
Taking China Mobile as an example, the number of its 5G package users will be 387 million by the end of 2021, an increase of 134.4% year-on-year, but China Mobile's mobile business revenue has only increased by 3.2%, far less than the overall revenue growth rate of 10.4%, of which the revenue of wireless Internet service mainly used by 5G users has increased by only 1.9%. From the absolute value of revenue growth contribution, China Mobile's overall revenue in 2021 increased by 80.2 billion yuan over the previous year, but the mobile business revenue only increased by 17.2 billion, of which the revenue of wireless Internet business increased by only 7.2 billion yuan year-on-year.
Obviously, for China Mobile, the revenue generated by 5G package users has not made a major contribution to its overall double-digit revenue growth in 2021.
The situation is similar for China Telecom and China Unicom. The overall business revenue of the two achieved a year-on-year increase of 11.7% and 7.9% in 2021, respectively, but the growth rate of mobile service revenue was only 7.4% and 4.7%, the number of 5G package users increased by 117% and 119% year-on-year, and its penetration rate has increased from 25% and 23% in 2020 to 50% and 49% respectively.
Mobile business revenue accounted for 65% of China Mobile's overall business revenue in 2021, but only increased by 17.2 billion yuan year-on-year, a growth rate of 3.2%, so China Mobile's overall business revenue increased by 80.2 billion yuan and achieved an increase of 10.4% More from the contributions of other business segments: of which the cable broadband business increased by 13.4 billion yuan, an increase of 17%; including government and enterprise affairs such as DICT, household value-added services such as "Mobaihe" and "Migu Video" The application and information services business, including emerging businesses, increased by 25.1 billion yuan, achieving a 33% year-on-year increase; product sales business increased by 24.5 billion yuan, the largest increase of 34%, and these segments outperformed the mobile business.
So, is there a 5G contribution to the growth of these business segments? The first thing that can be excluded is wired broadband services, home value-added services such as Mobaihe and emerging services such as Migu Video, which are mainly based on fixed-line broadband services that have mainly benefited from the increase in demand for online office, education, entertainment and so on during the COVID-19 epidemic, achieving substantial increase in revenue, which is not directly related to 5G.
The application of 5G in the To B government and enterprise market has been highly expected, and government departments such as the Ministry of Industry and Information Technology have also promoted the digital transformation of 5G-enabled industries by releasing the 5G application sail plan. However, from the perspective of China Mobile's performance contribution in 2021, 5G has not yet played a role in the revenue growth of government and enterprise services such as DITT.
China Mobile's growth in government and enterprise affairs mainly comes from the industry cloud revenue increased by 10 billion yuan, IDC increased revenue by 5.4 billion, ICT increased revenue by 3.7 billion, private line increased revenue by 2.4 billion, And Internet of Things increased revenue by 1.9 billion, while the 5G private network is still in the "comprehensive construction of demonstration projects" and "multiple segments have entered the stage of scale replication".
Although China Mobile has built 200 5G leading projects, expanded 1590 5G private network projects, and led to the signing amount of DICT projects of more than 16 billion yuan, it has only achieved a "revenue breakthrough" on the 5G private network and has not formed a scale.
Related to 5G and the formation of large-scale sales is the terminal product sales business, due to the rich 5G mobile phone models, the price threshold fell, mobile phone sales increased significantly, China Mobile in 2021 to achieve 96.8 billion yuan of product sales revenue, an increase of 24.5 billion over the previous year, an increase of up to 34% year-on-year, the growth of the overall business revenue made the largest contribution to the single business.
In 2021, China's 5G mobile phone shipments reached 266 million units, an increase of 63.5% year-on-year; as one of the important terminal sales channels, operators have benefited from the growth of their sales revenue.
Terminal product sales are also the single business with the largest revenue growth in 2021 for China Telecom and China Unicom, China Telecom's product sales achieved 36.7 billion yuan in revenue, an increase of 86%, and the substantial growth in the sales scale of 5G mobile phones led to a 124% year-on-year increase in mobile sales revenue; China Unicom's product sales revenue was 31.7 billion, an increase of 13% year-on-year.
However, compared with the operator's main business, the service business revenue, the profit contribution of terminal product sales revenue is very low: China Mobile's product sales revenue of 96.8 billion yuan, the corresponding cost is 96 billion; China Telecom's 36.7 billion product sales revenue, corresponding to the cost of 30.4 billion; China Unicom's 31.7 billion product sales revenue, the corresponding cost is 30.7 billion. For the three major operators, the sale of terminal equipment such as 5G mobile phones or home gateways is one of the means to pull customers into the network, and customers may also get free terminal equipment for pre-deposited phone bills or bundled packages, so these seemingly flat costs may be the result of financial balance.
Operators' terminal and other product sales business mainly serves the expansion of the main business of communications, to some extent, the sale of 5G mobile phones at a low price or low price is also one of the important investments of operators in 5G services.
The continuous investment in 5G has put pressure on operators
The biggest investment of operators in 5G services is still the capital expenditure for the construction of 5G networks. Since the start of 5G network construction in 2019, China Mobile's capital expenditure on 5G has reached 240.5 billion yuan by the end of 2021, and a total of 730,000 5G base stations have been opened. Compared with 4G, from 2014 to 2019, China Mobile opened 3.09 million 4G base stations, with a cumulative investment of about 424.9 billion yuan in 4G capital expenditure.
Simply calculating the average, the current capital expenditure of opening a 5G base station is about 2.4 times that of opening a 4G base station in that year.
In addition to the capital investment required for the construction of 5G base stations, the operation and maintenance and support costs after the opening of 5G base stations have also led to an increase in operators' operating expenses. Compared with 2020, China Mobile's network operation and support costs increased by 9% due to the increase in "accelerated completion and production of new infrastructure projects such as 5G and transformation investment", China Telecom increased by 11.6%, and China Unicom increased by 15% due to the increase in housing equipment rental costs, network operation and maintenance and energy consumption costs.
Among them, the increase in energy consumption costs brought about by the high power consumption of 5G base stations has been concerned by the industry, from the official data listed in the "2021 Annual Social Responsibility Report" released by China Telecom at the same time, it can be seen that since the 5G base stations have been opened to the network in 2019, its "base station power consumption per carrier frequency" has begun to show a rising trend year by year, and the single load frequency power consumption in 2021 is just 2 times that of the 5G base station in 2018.
Therefore, from the current short-term business trend, the revenue pull effect of 5G in the mobile user market is still not significant, and the private network application in the government and enterprise market has just made a revenue breakthrough, but the capital expenditure and operating cost pressure brought to operators has increased significantly, which together with other factors has led to a continuous downward trend in the operating profit margin of the three major operators in 2020 and 2021.
By the end of 2021, the three major operators have built and opened a total of 1.425 million 5G base stations, building the world's largest 5G network. According to the goals of the 14th Five-Year Plan of the Ministry of Industry and Information Technology in the information and communication industry development plan, by 2025, the number of 5G base stations per 10,000 people in the mainland will exceed 26, and the number of 5G base stations required by 1.4 billion people will exceed 3.6 million; that is to say, in the four years by the end of 2025, the three major operators will also need to build and open 2.1 million 5G base stations in accordance with the planning of the Ministry of Industry and Information Technology, with an average of about 500,000 new stations per year.
Although with the more low-frequency and indoor characteristics of 5G construction, it is expected that the capital expenditure of the three major operators for 5G will be significantly lower than that in 2020 and 2021, China Mobile expects its 5G capital expenditure to fall by 3% in 2022, and China Telecom has given an aggressive plan of 10%, but the pressure on capital expenditure is still huge.
In addition, with the opening of new 5G base stations every year, the network operation and support costs of the three major operators will only increase. Therefore, how to increase the penetration rate of 5G in the mobile user market and the government-enterprise private network market as soon as possible, so as to increase the revenue of 5G services and improve operating profit margins, is still a serious challenge for the three major operators.
Tariff reduction may be one of the revenue growth paths
In order to promote the comprehensive and coordinated development of 5G, 10 departments led by the Ministry of Industry and Information Technology issued the "5G Application "Sail" Action Plan (2021-2023)" in July 2021, which has become one of the important planning documents to guide the development of China's 5G business.
The "Action Plan" sets a number of goals for the development level of 5G applications, among which the requirements for personal consumption are that by 2023, the penetration rate of 5G individual users will exceed 40%, and the proportion of 5G network access traffic will exceed 50%; the requirements for vertical industry fields are to create more than 100 5G application benchmarks in each key industry.
The application of 5G in the vertical industry field is the business focus and future trend of the long-term development of 5G, but due to the serious fragmentation of the needs of government and enterprise customers and the characteristics of high customization requirements, it takes a long time for market cultivation to form scale revenue, so the goal set by the "Action Plan" for 2023 is to create a "5G application benchmark", hoping to leverage the market demand for large-scale replication through the benchmarking effect.
Therefore, in the short term, the main source of 5G revenue is still driven by business in the field of personal consumption. The "Action Plan" requires that 5G network access traffic in the field of personal consumption account for more than 50% by 2023, which is to hope that 50% of the wireless Internet service revenue of the three major operators can come from the 5G network that has been invested heavily to build, and alleviate the performance pressure of operators by improving the utilization rate of 5G networks.
However, although the number of 5G package users of the three major operators has reached 730 million by the end of 2021, the number of "on-network users who occupy 5G network resources", that is, the number of 5G mobile phone users, is only 355 million, which is 49% of the number of 5G package users claimed by the three major operating trademarks, that is to say, more than half of the 5G package users have not used 5G networks, creating 5G service revenue for operators.
According to the survey on the reasons why Chinese consumers do not use 5G in the "2022 H1 China Mobile Communications Consumer Market Research Report" of Ai Media Consulting, 62.0% of consumers said that the reason for not using 5G is that 4G can meet their daily needs, and 44.5% of consumers think that 5G tariffs are more expensive.
As the market has been slow to find a killer application for 5G to replace 4G, it is necessary to increase the willingness of mobile phone users to use 5G networks, and further reducing 5G tariffs may be a choice that operators have to make.
But in the case of less than expected revenue growth of 5G services, will the reduction of 5G tariffs not further hurt the business growth of operators? Judging from the performance in 2021, China Telecom gave the opposite answer.
Among the three operators, the total number of mobile subscribers of China Telecom added 21.41 million in 2021, far exceeding China Mobile's 14.97 million and China Unicom's 11.31 million, and its 50% 5G package user penetration rate also exceeded China Unicom's 49% and China Mobile's 40%, and finally reflected in the mobile service revenue in 2021, China Telecom increased by 7.4% year-on-year, which is also much higher than China Mobile's 3.2% and China Unicom's 4.7%.
Since the three major operators face the same market environment, China Telecom can stand out in the development of 5G services in 2021, and the key lies in taking the lead in launching the market strategy of 5G price reduction: the ARPU value of China Telecom's 5G users has dropped from 65.6 yuan in 2020 to 53.3 yuan in 2021, a drop of 18.8%. The most direct market feedback of 5G price reduction is that China Telecom's total mobile Internet traffic increased by 35.4% year-on-year in 2021, and mobile Internet revenue increased by 7.4% year-on-year to 140.3 billion, an increase of 9.6 billion yuan over 2020.
In contrast, China Mobile's mobile Internet access revenue increased by only 1.9% in 2021, only 7.2 billion yuan more than in 2020, lagging far behind China Telecom in terms of growth rate. The reason behind this is that it can be seen that the ARPU value of China Mobile's 5G users is as high as 82.8 yuan, which is 55% higher than China Telecom's 53.3 yuan, and 70% higher than the average ARPU value of 48.8 yuan for its overall mobile users.
Higher package tariffs will inevitably affect the attractiveness of 5G, especially in the absence of "killer" applications to pry, just "faster" selling points will often lose to the "more expensive" concerns, thereby affecting the popularity of 5G to non-high-end users, China Mobile's 5G package users have reached 387 million, but the number of 5G network customers who really access to 5G networks to enjoy 5G services is only 207 million. If China Mobile's more than 700,000 5G base stations only stay on a small number of high-end users, its revenue growth space will inevitably be limited, and lower network utilization and fixed network operation and maintenance costs will inevitably affect its 5G profitability.
The highest ARPU value of China Mobile's 4G users was 85 yuan in 2015, which is 2.2 yuan higher than the ARPU value of current 5G users. However, since the government asked the three major operators to speed up and reduce fees in 2015, the ARPU value of China Mobile's 4G users has fallen from 85 yuan to 53.2 yuan in 2020, and it took 6 years to reach the ARPU value of China Telecom's current 5G users.
The decline in the ARPU value of 4G users has brought about the increasing scale of 4G users, but China Mobile's mobile business revenue has climbed all the way from 2015, and in 2017, it created a peak record for mobile business revenue: 600.4 billion. This is enough to prove that for China Mobile, which has the largest mobile user market share, it actually has 4G experience to improve the penetration rate of 5G network users by further reducing 5G tariffs to open up space for mobile service revenue growth.
2015 and 2021 are two years worth studying for China Mobile. In 2015, China Mobile's mobile business revenue was 5522 yuan, and 554.9 billion yuan in 2021, which happened to be the starting line of the same level; in 2015, China Mobile's 4G users accounted for 38%, and with the reduction of 4G tariffs to 2017, it reached 73%, thus promoting the historical peak of mobile business revenue to 600.4 billion; in 2021, China Mobile's 5G package users accounted for 40%, if the rapid expansion of 5G user scale is promoted through tariff adjustment, Will it also be possible to achieve more than 70% of 5G users in two years and recreate the revenue growth trajectory of that year?
There is no doubt that this is an exciting question. The 2021 financial report is the first performance handed over after the listing of China Mobile A-shares, although its overall revenue growth rate hit a 10-year high, but mainly from the low base, smaller household market and government and enterprise market, as well as the sales of terminal products with extremely low profit margins, whether the mobile business revenue accounting for up to 65% of the revenue can be re-embarked on the upward channel with the help of 5G is the focus of the market, after all, about 60% of China Mobile's capital expenditure in 2020-2022 is invested in 5G.
At China Mobile's 2021 annual results conference, Chairman Yang Jie said that it will strictly control capital expenditures, and its 5G investment will show a gradual downward trend from 2022. Although it is important to strictly control the throttling of investment, it is more important to note whether China Mobile's 5G investment of more than 350 billion yuan can be returned on mobile business revenue as soon as possible. By reducing 5G tariffs, promoting the rapid growth of 5G user scale and 5G service traffic, and finally achieving a leapfrog in mobile services with 5G in 2022, China Mobile may be the best strategy.