China’s three major telecoms operators recently released earning data for the first three quarters of 2017. China Mobile is the largest of the three and possesses obvious strengths; China Telecom is experiencing rapid growth; China Unicom has finally hurdled recent difficulties and reported an increase of 155% in net profits, but this still leaves it with profits 22 times lower than those of China Mobile.
Regarding 4G users, China Unicom and China Telecom combined had a total of 328 million 4G network users, versus China Mobile’s 622 million; however, as of June, the former two had less than half the 4G users of the latter, suggesting that the gap is narrowing, albeit slowly.
China Telecom has a commanding lead in the broadband business, and had 131 million broadband customers at the end of September, an increase of 8.2 million. However, China Mobile’s broadband business broke 100 million users in September, an increase of 25.8 million. If it can keep up the pace of growth it may surpass China Telecom’s broadband business sometime next year.
Due to ongoing network expansions and the increased cost of tower leasing, all three operators are experiencing increasing operating expenses compared with last year; China’s Telecom’s expenses increased by 9.8%, while Unicom’s increased by 3.2%.
China Unicom’s profitability increased significantly, aided by its 2I2C strategy and strategic cooperation with Internet companies; its partnerships have allowed the two sides to complement one another, with its online partners’ big data analysis capabilities and advantages in reaching online customers helping it to extend business coverage and access its target consumers.
Traditional core businesses for mobile operators, including SMS and voice calling, are all in decline. The number of talk minutes used fell by 7.1% in the first three quarters of 2017.
China Mobile’s revenue for the first three quarters was up 4.9% to 569.5 billion yuan. Profit attributable to shareholders was 92.1 billion yuan, an increase of 4.6% over the same period in 2016.
China Telecom’s revenue for the first three quarters was up 4.1% to 274.7 billion yuan. Profit attributable to shareholders was 18.5 billion yuan, an increase of 45.5% over the same period in 2016.
China Unicom’s revenue for the first three quarters fell by 1.4 billion yuan to 201.7 billion yuan. Profit attributable to shareholders was 4.05 billion yuan, an increase of 155.3% over the same period in 2016.
Overall, all three companies performed well thus far in 2017; Telecom grew by the largest amount, Mobile maintained its status as the largest service provider, and Unicom, though revenue receipts fell, vastly increased its profitability. China Unicom’s income from its mobile business increased by 6.7% to 117 billion yuan; analysts believe this growth and recovery is contingent on increasing its 2I2C, 2B2C, and other online sales initiatives while maintaining low-cost, low-subsidy user acquisition.
Unicom’s businesses “under attack from all sides”
Thus far, China Unicom and China Telecom’s 4G businesses have been living in the shadow of China Mobile’s. However, their latest reports show that the former two reached a total of 328 million 4G users, 34.5% of the market, in 2017. In 2016 they had a combined market share of 29%; in 2015 the corresponding figure was 10%. Thus, they are gradually eroding China Mobile’s lead.
China Telecom was formerly a strong second within the 4G market, but this past year China Unicom has nearly caught up on the backs of an increase of 55.73 million users (vs. Telecom’s 45.65 million). It now has a user base only 8 million larger than China Unicom, with 168 million users in all.
In addition, its broadband business is under assault by China Unicom, which at 100 million users has nearly caught up to Telecom’s 131 million users and may overtake it next year if its rapid growth continues. China Telecom’s advantages in both businesses are no longer obvious.
Strategies and Comments
China Mobile maintains an absolute lead in its mobile and 4G businesses. It has said that it will maintain its “four-wheel drive” integration strategy and work to develop the personal, family, commercial, and new services markets to maintain growth.
China Telecom believes that by promoting business transformation it will enhance its advantages in the future. It also intends to break through institutional barriers to productivity, and strengthen its initiative in the areas of implementation and management.
China Unicom stressed innovation and integrated development and plans to accelerate the recovery of its broadband business while accelerating the transformation of the internet to enhance productivity. It intends to embrace market-oriented reforms to improve efficiency and direct its efforts. It expected the fourth quarter to be challenging as it will abolish domestic roaming fees.