November 5, 2018
Meet the world's newest broadband champion: China Mobile.
From a standing start three years ago, the world's largest mobile operator has become its biggest broadband player.
According to its latest monthly figures, China Mobile Communications Corp. has overtaken China Telecom Corp. Ltd. (NYSE: CHA) as the leader of China's broadband pack, as measured by customer numbers.
As of September 30, China Mobile had 146.8 million wireline subscribers, beating China Telecom's 143.8 million.
The mobile giant added a hefty 34.1 million customers in the first nine months of the year, including a record 4.95 million in the last month.
By comparison, the biggest US ISP, Comcast Corp. (Nasdaq: CMCSA, CMCSK), reported 29.8 million Internet subscribers at June 30.
But here's another, more telling stat: China Mobile's broadband ARPU is 34.2 yuan, or $4.92.
That's actually one-sixth higher than last year.
China Mobile is not the first telco to build market share by bundling home Internet with mobile. But its plunge into broadband tells a story about the Chinese market as well as the way that one of the industry's biggest players is preparing for the future.
For a start, China's torpid fixed-line market has long offered rich pickings.
It's been a two-way race since China Telecom and China Unicom Ltd. (NYSE: CHU) were formed out of the break-up of the national monopoly two decades ago. Telecom took southern China, Unicom the north, and they've mostly stayed in their lanes ever since.
That began to change in 2013 when China Mobile was handed a fixed license and acquired the struggling fourth carrier, China Tietong, that had been created out of the railway fiber network.
China Mobile did little with its new franchise for the first two years, but then began rapidly building out its fiber infrastructure. It now runs the world's biggest optical transport network, with backbone capacity of around 300 Tbit/s, and says 98% of its household customers are connected via fiber.
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The loss-leading buildout offers some competitive advantages.
It takes China Mobile onto to the home turf of its two rivals, while the bundled offering increases its "stickiness" and reduces churn in the febrile mobile market.
It also brings scale, or even more scale. With the mobile data explosion and the coming of 5G, every mobile player needs a deep fiber network with the lowest possible unit cost.
China's mobile wireless market has already arrived at the unlimited era, with China Mobile selling monthly packages for as little as 38 yuan ($5.51).
And with most mobile use taking place indoors -- globally indoor usage is said to account for 65-80% of all traffic -– getting into the home means China Mobile can offload customers' data, optimizing traffic management and improving customer experience.
That positions it for the smart home and home entertainment segments, where rivals are already well established. China Mobile's digital set-top box, Mobaihe, had been installed in 57 million homes by December 2017.
Another advantage, according to some analysts, is that it will drive down its peering costs. The big gaming and online media companies currently prefer to host their content on China Telecom and China Unicom servers, because these are perceived to be faster and more stable. China Mobile's broadband dominance will alter those calculations.
Because China Mobile is a state-owned company, a political calculation is also involved. By spreading competition, lower prices and all-fiber networks, China Mobile executives are making their bosses look good, and doing no harm to their own prospects.
— Robert Clark, contributing editor, special to Light Reading
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