The latest numbers from China's two biggest telcos reveal that right now, not even 5G at massive scale can grow profits.

Over the first three quarters this year, China Mobile reported earnings of 98.5 billion Chinese yuan (US$13.6 billion), with double digit growth in both profit and revenue. China Telecom boosted revenue 9.6% and income 5.2%.

The companies' Q3 numbers were equally buoyant, yet growth in mobile services – their biggest segment – was several points below total revenue growth. China Telecom's mobile service revenue advanced 5.6%, and while China Mobile didn't break out mobile service numbers, total service revenue increased 8.3%, also short of the total growth.

Figure 1: China Mobile, China Telecom post strong Q3 results but with little help from their huge 5G deployments.
Source: Grid Scheduler on Flickr
(public domain)

But the most revealing number is average revenue per user (ARPU). It's going nowhere.

China Mobile's ARPU of 50.7 yuan ($6.98) is down 1.6 yuan since June 30 and has crept up just 1% in the past year. Three years ago, just prior to the commercial start of 5G, it was 50.2 yuan ($6.91).

China Telecom has traveled a similar journey, with mobile ARPU actually contracting from 46.1 yuan in December 2018 ($6.34) to 45.5 today ($6.26).

Meager return on giant network

Of course, these state-controlled Chinese operators have a different mission from their private sector counterparts. They're directed to offer low prices to ramp up 5G adoption – a national goal – while at the same time improving speed and network performance.

Even so, having built out the world's largest 5G network (2.1 million basestations and counting), this is a meager return.

It's obviously not for lack of users. Whether counting the '5G package' number, which includes 4G network users on 5G data packages, or actual 5G customers, they are working off a hefty installed base.

China's Ministry of Industry and Information Technology (MIIT) said the total number of 5G network users was 475 million at the end of July. China Mobile alone had 292 million 5G network customers on September 30, accounting for just over half of its total 5G subscriber base of 557 million.

However, even those eye-watering numbers aren't enough to generate a serious return from consumer 5G at this stage.

Enterprise 5G looks more promising. None of the operators have broken out their numbers, but it is clear that they are deploying it on a significant scale. China Unicom, for example, said it had 2,785 5G private network deployments at the end of September.

Digital enterprise drives growth

It's China's transition to enterprise digital services – cloud, data center, digital transformation and 5G – that has become the big growth driver for Chinese operators. Indeed, China Telecom's digital enterprise revenue grew 17% to 85.6 billion yuan ($11.8 billion), with cloud revenue doubling, while China Mobile's enterprise and cloud services grew 40% to 68.5 billion yuan ($9.4 billion).

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The other major contributor for China Mobile was handset sales, with the giant operator enjoying a 36% uplift to 103 billion yuan ($14.2 billion).

But the China 5G story is the same as everywhere else – users and networks are there, but they await a device, a business model or an application that will generate revenue and engagement.

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— Robert Clark, contributing editor, special to Light Reading