The mysterious case of the vanishing Chinese customers

China's usually reclusive telco bosses made their annual foray into the spotlight this week. This is what we learned.

China is going all out on 5G construction
The headline may not be new, but the numbers are.

The big three telcos are ready to sink around 180 billion yuan ($25.5 billion) into their 5G rollouts in 2020. That's more than four times the 2019 level.

It's not clear whether this is something long planned, or whether it flows from the party leadership directive to double down on 5G and boost the virus-stricken economy. (See China 5G: Unicom and Telecom speed up rollout.)

However, analysts have complained that the aggregate rise in capex was short of expectations, suggesting that operators have shifted some spend from other items to 5G.

Additionally, China Tower expects to tip RMB17 billion ($2.4 billion) into 5G this year, taking the total close to RMB200 billion ($28.2 billion).

It's not always easy being government-owned
Being state-owned in a socialist economy isn't always a doddle.

Sure, the regulator has your back, and you don't have to squander your hard-earned cash in a frivolous spectrum auction, but every now and then the public interest rears its ugly head.

Specifically, the MIIT has been bearing down on operators over the past five years, demanding "faster speeds and lower prices." The result is a series of price cuts, in particular in mobile.

In the first year of the scheme, China Mobile cut mobile tariffs by 43%. Its average revenue per user since then has fallen from RMB59 ($8.30) to RMB49 ($6.90). China Unicom's has shrunk from RMB47.80 ($6.75) to RMB40.10 ($5.65).

No wonder they struggle to get any revenue growth in their core business.

Telco leaders need to get their story straight about subs losses
The plunge in total subscriber numbers over the first two months of the year has attracted a lot of attention both inside and outside China. (See China's mobile subs base shrinks by 20M.)

Following a tepid January, the three operators lost 19.4 million customers between them last month, with the smallest player, Unicom, taking the biggest hit.

One of the more lurid explanations is that the disappearance of millions of subscribers reflects an unreported mass death toll from COVID-19. China's numbers are dodgy but not that dodgy.

Problem is, industry bosses themselves aren't sure what to make of it.

China Unicom boss Wang Xiaochu blames it on customers dumping dual SIMs. For years, a lot of people have carried a second or third SIM to avoid roaming and long-distance charges. But those charges are disappearing because of changing price structures. Plus, people have been staying at home and connecting over Wi-Fi for the past two months.

China Telecom vice president Wang Guoquan says it's because of the closure of retail stores during the outbreak, while China Mobile CEO Yang Jie also pins it on the coronavirus without elaborating how.

The epidemic is no doubt the biggest factor – the January number is weak because the virus wiped out the traditional Chinese New Year shopping blitz. The collapse in February, while much of the country was in lockdown, appears a direct result of the contagion.

However, analysts also point to the introduction of even tighter ID authentication rules in December, causing customers to abandon or decide not to renew their services.

Network sharing is in
The Telecom-Unicom network-sharing experiment appears to be an unqualified success. It has saved RMB10 billion ($1.4 billion) on rollout costs since last September, according to Unicom figures.

Combined, it will give the partners scale to go head to head with China Mobile, which expects to have 300,000 basestations in operation by year end. The two smaller operators are targeting 250,000 by the end of the third quarter.

But it may also pave the way to a partnership between China Mobile and the underfunded new licensee, China Broadcast Network (CBN). (See China's Newest Operator Now Has 2 Suitors.)

China Mobile's Yang Jie confirmed last week he's had discussions with CBN management on a sharing arrangement.

There's some pressure from above to get a deal done. But any agreement struck would certainly look different from the Telecom-Unicom partnership, which is basically one of equals.

— Robert Clark, contributing editor, special to Light Reading

Be the first to post a comment regarding this story.
Sign In