Update from the country's biggest mobile operator confirms that total capex investment levels will dip this year.

Iain Morris, International Editor

March 23, 2017

4 Min Read
Chinese Telco Capex to Fall 13% This Year

China Mobile has followed in the footsteps of smaller rivals China Telecom and China Unicom by announcing plans to reduce capital expenditure this year following a wave of investment in higher-speed 4G networks.

The world's biggest mobile operator by customer numbers said it would spend roughly 176 billion Chinese yuan ($25.6 billion) in 2017, about 6% less than it spent last year.

The announcement, which formed a part of China Mobile Ltd. (NYSE: CHL)'s latest results update, reflects a cyclical downturn in telecom equipment markets that is weighing heavily on vendors such as Sweden's Ericsson AB (Nasdaq: ERIC) and Finland's Nokia Corp. (NYSE: NOK).

Having built out national 4G networks, and made substantial investments in fiber lines to support higher-speed services, operators have been cutting back on access infrastructure investments and often channeling resources into lower-cost digital transformation initiatives.

China Mobile's update came shortly after China Telecom Corp. Ltd. (NYSE: CHA) said it would reduce capital expenditure by 8% this year. But China Unicom Ltd. (NYSE: CHU) has wielded an even bigger axe, promising to slash spending by 38% this year, to just RMB45 billion ($6.5 billion). (See China Telecom to Cut Capex by 8% in 2017.)

The decision by the country's smallest 4G operator follows huge cutbacks last year, when capital expenditure fell by 46%, to RMB72.1 billion ($10.5 billion).

The statements from China's three national telcos mean that overall capital expenditure on telecom infrastructure is set to fall by around 13% this year.

Outside China, Tier 1 operators including Russia's Mobile TeleSystems OJSC (MTS) (NYSE: MBT), France-headquartered Altice and US-based CenturyLink Inc. (NYSE: CTL) have also recently said they will cut spending this year. (See Russia's MTS: There Is No 5G Business Case, Altice to Slash 2017 Capex Despite US FTTH Plan, French Rivalry and CenturyLink's Capex Axe to Fall on Infinera, Ciena – Analyst.)

While investments in 4G will still account for the biggest share of China Mobile's capital expenditure, investments in this area will fall by 10.6%, to RMB74.2 billion ($10.8 billion), in 2017, said the operator.

Spending on fixed broadband access, meanwhile, will drop by 47.2%, to just RMB13.5 billion ($2 billion).

Vendors targeting the transmission network (excluding access) can take some heart from the announcement, however, with China Mobile saying it will spend RMB38.7 billion ($5.6 billion) in this area -- an increase of 4.8% on investments in 2016.

In its investor presentation, the operator said the transmission investments would go partly toward supporting the future development of 5G technology.

Want to know more about 4G LTE? Check out our dedicated 4G LTE content channel here on Light Reading.

Besides revealing details of its spending plans, China Mobile flagged a 6% rise in sales last year, to more than RMB708 billion ($103 billion), thanks mainly to growth at its huge 4G business.

Overall mobile customer numbers rose by 23 million last year, to 849 million, while the number of subscribers using 4G services soared from 312 million at the end of 2015 to around 535 million.

That fueled an increase in spending per customer and puts China Mobile far ahead of rivals China Telecom and China Unicom.

China Telecom finished 2016 with 215 million mobile customers, including 122 million 4G users, while China Unicom had 264 million mobile customers and more than 104 million 4G subscribers.

China Mobile's earnings (before interest, tax, depreciation and amortization) fell by 6.9% in 2016, to around RMB257 billion ($37.3 billion), while net profit edged up 0.2%, to nearly RMB109 billion ($15.8 billion).

Excluding a one-off gain in 2015 from the sale of tower assets, net profit would risen by 10.5%, said the operator. But markets reacted negatively to news about the bottom line, with China Mobile's share price closing down 3.43% in Hong Kong earlier today.

The saturation of the consumer market is driving all three Chinese telcos to expand into new enterprise markets and China Mobile said that one of its goals this year is to add 100 million connections to its fledgling IoT business.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

Read more about:


About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like