Cloud, digital transformation drive Chinese telcos' H1 growth

China's big three operators have just delivered some notably similar first-half results. For each of them, cloud and digital transformation drove topline growth, profit rose more than revenue and shareholder returns increased generously. 

China Telecom, the last to file, reported net earnings of 21.8 billion Chinese yuan (US3.1 billion), an 8.2% gain over last year, with revenue up 2.8% and service revenue 4.3% higher.

Industry giant China Mobile said net profit had improved 5.3% to RMB80.2 billion ($11.2 billion), outpacing revenue, which rose 3% to RMB546.7 billion ($76.6 billion).

China Unicom announced 11.3% higher net income of 13.8 billion ($1.93) on the back of a 2.9% lift in sales to RMB197.3 billion ($27.6 billion).

Thanks to the halo effect that is attached to Chinese state-owned enterprises (SOEs) these days, the big three operators once again enjoyed healthy demand for their cloud and enterprise digitalization services.

China Mobile says its digital transformation business grew 11% to RMB147.1 billion ($20.6 billion), accounting for 26% of all revenue. China Telecom reported digital industry sales of RMB73.7 billion ($10.3 billion), a 7% increase, and China Unicom said revenue grew 7% to RMB43.5 billion ($6.1 billion).

Double-digit growth

All three experienced double-digit growth in cloud. China Telecom's Tianyi Cloud grew revenue by 20% to RMB55 billion ($7.7 billion), while China Mobile Cloud hiked sales by 19% to RMB50 billion ($7 billion) and China Unicom grew 24% to RMB32 billion ($4.5 billion).

The relatively strong profit numbers were aided by cost containment and, in the case of Mobile and Unicom, lower capex.

China Mobile reported a 21% dip in capital spending to RMB64 billion ($9 billion), with the full-year total expected to be less than RMB173 billion ($24.2). China Unicom capex dropped 13% to RMB24 billion ($3.36 billion). It is expecting RMB65 billion ($9.1 billion) over the full year.

For China Telecom, the higher earnings were partly the result of lower opex and finance costs and one-offs such as higher share of profits from associates.

In support of the government efforts to stimulate the domestic stock market, the three operators all jacked up shareholder returns.

China Telecom announced a 17% rise in dividend and said it now accounted for more than 70% of earnings. China Unicom lifted dividend by 22% and China Mobile by 7%.