China Operators Head Into 5G With Lackluster Results

Robert Clark
News Analysis
Robert Clark
10/29/2019

The much-anticipated rollout of 5G services in China will follow another set of lackluster results from the country's big three operators.

China Mobile, China Telecom and China Unicom will formally debut 5G services on Thursday, barely five months after being given full licenses.

They will hit the market at pace, having clocked up 10 million advance orders and with 80,000 base stations deployed. (See China Telcos Rack Up 9M 5G Advance Subs.)

But their results for the first nine months show they are struggling to extract profitable growth out of the mobile business.

According to government figures, mobile services revenue for the first three quarters was down 3.9% year-on-year to RMB677 billion ($95.8 billion).

The home broadband market is still experiencing organic growth, with total revenue up 9% to 315 billion Chinese yuan ($44.6 billion), primarily thanks to the addition of 43 million new subscribers.

But it's been a tough period in particular for the industry giant, China Mobile, despite its 942 million mobile customers and growing broadband unit. (See China Broadband Seeks Path Back to Profit.)

Operating revenue came in at RMB567 billion ($80.3 billion), down fractionally from last year, while mobile ARPU declined to RMB50.2 ($7.10) from RMB52.2 ($7.40).

China Mobile attributes the soft performance in part to the cancellation of domestic data roaming charges in July last year.

The deeper problem is the industry malaise of escalating traffic and flat revenue; average monthly data consumption has grown 116% over the past year.


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On the plus side, it's added 38 million fixed-line broadband customers and there's been a revival in SMS, which grew 41% thanks to corporate demand.

Despite the relatively soft performance, the net profit margin, down 14.4% from 16.7%, puts it well ahead of its competitors.

While China Unicom, for example, boosted its net profit by 12%, its margin remains a meager 4.5%.

It reported operating income down 1.2% to RMB217.12 billion ($30.7 billion), with mobile revenue dropping 6%.

But it's building a promising business in industrial IoT, racking up RMB24.3 billion ($3.4 billion) in sales, 41% ahead of last year and now accounting for 12% of total revenue.

For the third operator, China Telecom, revenue contracted 0.8% to RMB282.8 billion ($40 billion). Earnings (before interest, tax, depreciation and amortization) rose 13.8%, but net profit declined 3.4% to RMB18.4 billion ($2.6 billion).

The three operators will officially launch 5G in a ceremony at a Beijing trade show on Thursday morning. The services will go on sale the following day.

They are offering discounts of up to RMB600 ($84.93) on 5G packages.

With mobile number portability set to start next month, the telcos are pricing 5G with an eye to retaining customers, offering discounts that favor long-term customers. (See China Operators Brace for Portability .)

The industry's newest mobile player, China Broadband Network, owned by the National Radio and TV Administration, won't take part in the Thursday launch. (See China's CBN Starts 5G Trials Amid Doubts.)

It is still in early stage field trials and unlikely to start service until at least the second half of 2020.

— Robert Clark, contributing editor, special to Light Reading

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