x
Asia

China Mobile misplaces 4M customers but finds another 30M for 5G

China Mobile isn't used to reporting negatives, but its first earnings report for 2020 was sprinkled with them. Revenues, earnings and headline profits all dipped for the first quarter as the world's largest mobile operator felt the impact of the coronavirus outbreak in China. Some 4 million customers have disappeared since the start of the year. Conspiracy theorists see COVID-19 deaths in those numbers, and signs of a government cover-up.

Whatever the truth of that matter, the report may be keenly read by other service providers wondering what impact COVID-19 will have on their own operations. Despite the negatives, many will pray for a similar outcome to China Mobile. As big as the figure of 4 million customers sounds, it equals less than half a percent of the total at the company, which finished March with 946 million mobile subscribers altogether. Revenues fell just 2%, to 181.3 billion Chinese yuan (US$25.6 billion), compared with the year-earlier period, while net income was down only 0.8%, to roughly RMB23.5 billion ($3.3 billion).

The figures seem to vindicate arguments that telecom will prove fairly resilient to COVID-19 as a critical lifeline to the wider world for people under lockdown. Interestingly enough, while customer numbers fell in mobile, there was no decline at China Mobile's fixed-line business, which picked up another 4 million broadband customers to finish March with 191 million in total. On the mobile side, usage of traditional voice services fell from 278 minutes per user each month in the final quarter of 2019 to just 234 minutes in the first quarter of 2020. Mobile data usage, though, rose from 7.1 to 8.3 gigabytes per month over the same period.

But the standout improvement was in 5G, with China Mobile now claiming nearly 32 million 5G customers, up from just 2.6 million in December. Sustain that rate of growth and the operator would be on course for almost 120 million 5G customers by the end of the year. That may be difficult once China Mobile has accounted for all the early adopters. But if it can shift nearly 30 million customers to 5G during the darkest weeks of the outbreak, it might be able to achieve an even higher rate of conversions now the worst is apparently over.

A challenge for the operator is to meet the investments that are required. This year, China Mobile has earmarked RMB100 billion ($14.1 billion) for capital expenditure on 5G, an increase of 317% on what it spent in 2019, according to market-research firm Omdia, a sister company to Light Reading. Its plan is to add at least 250,000 5G basestations by the end of the year.


Want to know more about 5G? Check out our dedicated 5G content channel here on Light Reading.


Meeting this commitment will be difficult as earnings and cashflow are squeezed by COVID-19. Just-published figures show that earnings before interest, tax, depreciation and amortization fell nearly 6% in the first quarter, to RMB68.5 billion ($9.7 billion), compared with the year-earlier period. Under government pressure to hit deployment targets, China Mobile may look to reduce costs in other parts of the business to offset the increase in spending on 5G. "The group will continue to develop new sources of revenue and identify ways to curtail expenses, while taking measures to reduce costs and enhance efficiency," it says in its statement.

Hacking into headcount will be difficult if China Mobile is to avoid disruption to 5G buildout and sales and marketing activities. Nevertheless, the operator may be able to realize some cost savings through pruning of a workforce that numbered as many as 456,239 employees at the end of last year. While major US operators have slashed tens of thousands of roles in recent years, China Mobile seems to have been a lot more cautious on the jobs side: Its staff numbers have fallen less than 1% since the end of 2016.

The latest update on 5G will be a further concern for US officials already worried about falling behind China in the development and rollout of the new network technology. With at least 30 million 5G customers, China already has enough users of the service to spur the development of new commercial applications that might not be feasible in the old 4G world. That is exactly what the US does not want to hear.

Related posts:

— Iain Morris, International Editor, Light Reading

Be the first to post a comment regarding this story.
HOME
Sign In
SEARCH
CLOSE
MORE
CLOSE