China telco growth slowing on weaker enterprise demand

Chinese telcos' growth rate falls below GDP growth for first time in years amid lower enterprise demand.

Robert Clark, Contributing Editor, Special to Light Reading

June 7, 2024

2 Min Read
Chinese flag in front of an office building.
(SOURCE: ALAN NOVELLI/ALAMY STOCK PHOTO)

After two years of rapid expansion fuelled by cloud and digital transformation services, growth has slowed for China telcos. First quarter industry growth fell behind China's GDP growth rate for the first time in several years, a research paper has pointed out.

It says revenue from the four operators reached 443.7 billion Chinese yuan (US$61.3 billion), a 4.5% improvement year-over-year but well down from the 7.7% growth of Q1 last year and below the 6.2% achieved for the full-year.

Growth is 0.8 percentage points below the country's Q1 GDP growth number of 5.3%.

The revenue decline was primarily a result of the lower growth in emerging business and mobile data, the paper, by Hu Shiliang, said. Emerging business revenue, which includes cloud and data center services, was RMB117 billion ($16.2 billion), up 12.2%, but well down on the 19% growth rate a year ago. 

Revenue from mobile data, the biggest single segment, totalled RMB160 billion ($22.1 billion), down 1.3%, 0.4 percentage points below last year.

The underlying reason for the lower numbers was the lack of enterprise demand for digital transformation, especially in the SME segment, Hu argued.

889 million 5G subs

"The lack of enthusiasm for digital applications such as 5G determine the lack of market demand for digitalization, which is the main reason for the decline in revenue growth," he said. 

Additionally, telcos were no longer enjoying the benefits of growing scale, while a number of their products were low value-added, he said. 

Chinese operators may be facing headwinds due to a levelling-off in enterprise demand, but they are still posting some of the industry's strongest financial results. In Q1 China Mobile reported a net profit of RMB29.6 billion ($4.1 billion), up 5.5%, China Telecom boosted earnings by 7.7% to RMB8.6 billion ($1.2 billion) while China Unicom announced a RMB5.6 billion ($773 million) profit, 8.9% higher.

There's no sign of investors turning away, either. Since the start of the year, China Mobile, China Telecom and China Unicom stocks are up 17%, 19% and 28%, respectively.

The Chinese telecom industry this week celebrated the fifth anniversary of the launch of 5G. The four state operators between them have 889 million 5G users, accounting for just over half of the worldwide total of 1.6 billion, according to MIIT figures.

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About the Author(s)

Robert Clark

Contributing Editor, Special to Light Reading

Robert Clark is an independent technology editor and researcher based in Hong Kong. In addition to contributing to Light Reading, he also has his own blog,  Electric Speech (http://www.electricspeech.com). 

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