Chinese telcos' 5G numbers continue to build, driven by some aggressive price competition.
In the latest round of discounts, China Mobile is reportedly offering an entry-level package for as little as 69 yuan (US$9.95).
China Mobile and rival China Telecom say they added 20 million 5G "package subscribers" between them in May, with China Mobile claiming 55.6 million subs and China Telecom 30.1 million. The third telco, China Unicom, is yet to disclose its 5G numbers.
The numbers are way ahead of any other telco. Yet as in previous months, the number of subscribers includes many still using 4G and is well above the number of phones in the market.
The industry shipped 15.6 million 5G handsets in May, a quarter less than the number of 5G adds reported by just two operators, according to government research body CAICT.
The telcos are clearly in a race to acquire and hold 5G customers. The business logic is less clear.
It is possible the state-owned firms have been directed to quickly rack up 5G customers with the aim of getting enough scale to drive service innovation.
The 69 yuan prices might be outliers, but the three operators are all offering entry-level packages at around 30% below their launch price last November of 128 yuan ($18.09), a reporter from Shanghai Securities News discovered.
This kind of price competition is not sustainable. Operators are barely going to get their money back at 128 yuan, let alone at 90 yuan.
This may build out scale, but these are hardly the kind of big-spending early adopters that will embrace and pay for new services. Not to mention that quite a few customers are complaining about being forced onto 5G packages they didn't want.
Operators have locked themselves into 12-month or 24-month contracts. At some point they are going to have to raise prices.
Curiously, some analysts are on board with this madness.
One analyst, Fu Liang, told Shanghai Securities News that with handset prices falling below the 1500 yuan ($211) mark, and widening the addressable market to even more price-conscious consumers, operators will need to reduce tariffs even further.
The final point here is the wider industry context. After a quarter century of non-stop subs growth, the China market is running out of road.
China Mobile last month added just 252,000 net subs to its total of 947 million. It's increased by 565,000 since the start of the year. China Telecom has added 5.2 million. China Unicom has lost 8.6 million.
By comparison, last year China Mobile registered 25.2 million net adds for the year, China Telecom 32.6 million and China Unicom 3.4 million.
No wonder panicky execs are wielding the ax on 5G prices.
— Robert Clark, contributing editor, special to Light Reading