Now the banquets and toasts are over, China's Year of the Monkey is underway. Specifically, it's the Year of the Fire Monkey which, according to tradition, is ambitious and adventurous. That might well describe the last 18 months in Chinese telecom -- by local standards, at least, it's been a lively ride.
For one thing, consumers now have the choice of some 40 MVNO brands. With total subs topping 20 million, the MVNOs are starting to get some scale. In a parallel move in fixed-line broadband, the government has invited private firms to take part in trials.
Consumers are getting a better deal, too, thanks to some determined jaw-boning from officials, forcing operators to cut data charges and boost access speeds.
Last year, the operators also spun off their basestation assets into a dedicated tower company, swapped around their CEOs and obtained FDD licences. Just before Chinese New Year, the two lagging players, China Telecom Corp. Ltd. (NYSE: CHA) and China Unicom Ltd. (NYSE: CHU), struck an infrastructure-sharing deal. (See China Unicom, Telecom Flag Strategic Partnership, Telcos pool $34.5B of assets in China Tower and All Change in China? )
This burst of mild reform has taken place while much of the traditional economy is cratering. Operators might fret about losing business to OTT players, but in contrast with many other state firms they have sound balance sheets and growth prospects.
Indeed, they are seen as key to China's economic recovery and restructuring. The government has put them at the core of the Internet Plus program, unveiled last July, which envisages deploying IoT and other digital technologies to revitalize legacy manufacturing.
It will be some time before IoT has an impact on telcos' bottom lines, however. Instead, the industry focus in the Year of the Fire Monkey will be on the related issues of industry competition and the speed and price of data services.
The Ministry for Industry and IT (MIIT) will be keen to monitor this impact. Officials are under pressure from consumers to improve bandwidth and cut prices. They spent a great deal of time and effort last year on lobbying the operators, and several senior officials have already said publicly they want to see more price cuts this year.
The problem is that slight changes probably aren't enough to challenge China Mobile Ltd. (NYSE: CHL)'s dominance. Last year, it added 200 million 4G customers and in the first half grabbed 52% of operator revenues. (See China Mobile's 4G Roll.)
The Telecom-Unicom alliance will reduce capex, but it is unlikely to help them close the gap with China Mobile. Similarly, while MVNOs have made incremental progress, there won't be any cuts to retail prices unless wholesale fees are reduced.
The obvious reform would be to break up China Mobile, but not even the adventurous spirit of the Fire Monkey is likely to bring that about.
Of course, competition among operators is one thing. Competition from OTTs is something else altogether. Traditional business is shrinking fast. Due to apps like WeChat and Weibo, voice revenues fell to just 32% of total service revenues last year, ten percentage points below the 2014 level, while mobile voice minutes shrank for the first time ever, according to MIIT figures.
"The internet companies are having a huge impact, relentlessly eating the lunch of telcos and even replacing them," said Beijing-based research firm Analysys International. It predicts falling voice revenues, difficulty in customer acquisition and higher costs, at the same time as greater pressure for price cuts.
"The operators' winter has arrived, and many communications industry people seem to be unprepared," the research house said.
— Robert Clark, contributing editor, special to Light Reading