Mobile Unicom Three Quarterly Revenue, Operators Explore 5G Business New Mode

Recently, operators' data in the three quarter have been released. This is a tightly regulated market, not only from the decline of internal traffic dividends and the business exploration promoted by policies, but also from the input of 5G networking and the test of business models.

According to the three quarterly report, China Unicom and China Mobile's business revenue declined to varying degrees, Mobile Corporation profits declined, and Unicom's cash flow declined considerably.

In October 22nd, at the press conference of the State Council Information Office, Huang Libin, director of the operation and Coordination Bureau of the Ministry of industry and information technology, said that the total number of telecom businesses increased by 23.9% in the first three quarters of this year, according to the calculation of last year's fixed price. 5G business started well. As of the end of September, three basic telecom enterprises have opened more than 8 5G base stations nationwide.

In the same period last year, the total number of telecom businesses grew by 139.8% compared to the same period last year, and the income of the Internet and related services increased by 20.2% over the same period last year.

Xie Yushan, director of research and consulting at Ji bang, told the twenty-first Century economic news reporter that the global carriers are facing challenges in mobile business, which is affected by market saturation, acceleration and downpayment, fierce competition in the market and the gradual decline of 4G traffic dividends. Most operators' mobile services revenue is declining. At present, the bigger challenge for operators lies in the initial investment and networking of 5G. 5G is becoming a competition that has to be carried out. If the user is lost due to absence, it will have a bigger impact.

In the first three quarters, the performance declined slightly.

In the context of speed and cost reduction, China Mobile and China Unicom, which have announced initial financial data, have already performed data on their business.

In the third quarter of 2019, the average monthly household income (ARPU) of Mobile Corporation was 50.2 yuan, down 9.9% from last year, while Unicom's figure was 40.6 yuan, down 13.25%. But according to the mobile unaudited three quarter data, the average monthly household mobile Internet traffic (DOU) is 6.6GB, which is almost double that of the same period last year.

This has been shown in last year. According to the relevant sources of the Ministry of industry and information, the speed-up and cost reduction of the network implemented in 2018 helped boost the growth of information consumption. In September of that year, China's mobile users' household mobile traffic consumption reached 5.14GB, which is 2.6 times the same period in the previous year.

Surging traffic and declining average user revenue have prompted operators to seek new profit models.

China Mobile released the first three quarters of the unaudited major operating data show that during the period, the operating income of 566 billion 700 million yuan, down 0.2% compared to the same period, the profit attributable to shareholders was 81 billion 800 million yuan, down 13.9% compared to the same period. In the first three quarters of 2018, mobile revenues also declined and profits rose slightly by 3.1%.

In the announcement, the company said that the flow dividend quickly subsided, superimposed on the July 2018 abolition of the domestic flow "roaming" fees, the first three quarters of the group communications services revenue has been under a greater pressure. We will push forward the integration of the four wheel drive, and strive to restore the growth of communication services revenue throughout the year.

IDC Cui Kai, senior research manager of China's emerging technology research department, told the twenty-first Century economic news reporter that China Mobile is actually in the transition period of business mode, from the early voice revenue to the traffic revenue. At present, voice revenue has declined, and traffic revenue has reached its peak. "Where does the future income come from? Whether it is 5G or the Internet of things, whether the business mode is still charging in the way of traffic and package now, the company will have new thinking."

However, Cui Kai thinks that judging by the time point of raising speed and lowering fees, by the fourth quarter of this year, this measure has been implemented for more than a year, resulting in the gradual elimination of the impact on operators' performance.

"I think starting from the fourth quarter of this year, even if operators' revenue is declining, the situation will be eased compared to the fourth quarter of 2018." He pointed out that in the future, with the promotion of unlimited packages, there may be new business models in the field of mobile communications. "The future must be digital business and digital platform business facing the B end market, etc., to explore business models."

According to China Unicom's earnings report, the company achieved operating income of 217 billion 100 million yuan in the first three quarters of this year, down 1.18% compared with the same period last year, and the net profit attributable to shareholders of listed companies was 4 billion 316 million yuan, up 24.38% over the same period last year. In the same period of 2018, China Unicom's revenue also showed an increase, and its profit rose by 164.5%.

According to China Unicom, the mode of "cloud + Intelligent Network + intelligent application" integrated operation has achieved a breakthrough in the cultivation and scale expansion of innovative business.

In the first three quarters, China Unicom's industrial Internet business revenue was 24 billion 291 million yuan, up 40.8% from the same period last year. Thanks to the pull of innovation business, the revenue of fixed line business has reached 78 billion 863 million yuan, an increase of 7.7% over the same period last year. Therefore, the company's overall main business revenue decline compared with the first half of this year -1.1% eased.

Cui Kai pointed out that Unicom's performance data base is relatively small, and has experienced recent years of strategic adjustment, coupled with the policy dividend brought about by mixed changes, is in the period of performance reversal.

He further pointed out that on the one hand, China Unicom will have more interaction with the BAT and other Internet factories in the new business development and package launch. On the other hand, it will also adjust revenue through the internal regionalization business and bring revenue improvements to the company.

"More importantly, it comes from the challenge of industrial development." He concluded that the telecommunications industry, as a country's water and electricity like infrastructure, will still face the pressure of revenue growth in the future. But with the exploration of the company's internal transformation and business models, especially the exploration of the balanced development of C and B services, operators will find a more suitable path.

5G preparation for conversion period

China Unicom is the operator that has fully disclosed its three quarter earnings so far. Compared with the previous two years, the company's cash flow has a certain year-on-year downward trend.

According to the financial report, as of September 30th this year, the balance of terminal cash equivalents of China Unicom was 29 billion 461 million yuan, but last year the figure was 41 billion 727 million yuan. The company did not explain this further.

However, Unicom mentioned in its earnings report that in September this year, China Unicom holding subsidiary and China Telecom signed a nationwide agreement to build a 5G network, which will help to reduce the cost of future 5G network construction and operation and maintenance, effectively achieve 5G network coverage, and achieve mutually beneficial and win-win results.

Xie Yushan told reporters that 5G's infrastructure cost is about 2-3 times that of 4G. Most operators are mainly NSA (independent Networking) at the beginning, but SA (independent Networking) can support the complete 5G function. Therefore, SA will be established in the long term.

But Cui Kai told reporters that in the financial indicators of operators, the investment in 5G will be presented in terms of depreciation of equipment. At present, because the operators and equipment providers are in the stage of business exploration, the procurement process may not be carried out in accordance with the standard contract. Therefore, he believes that the financial input from the 5G based network construction will probably not show up until the second half of 2020 and even in 2021.

Cui Kai believes that "in the process of 4G to 5G conversion, the pressure on operators will come from two aspects: construction investment and operation and maintenance, among which the latter will be more stressed."

He analyzed that operators in the initial stage of 5G construction, need to cooperate with the equipment manufacturers to quickly build and verify the network, so as to set up industry construction and application benchmarking, so in the initial purchase and other cooperation will borrow, pilot mode, will not bring too much pressure on the funds.

The key lies in operation, because the 5G architecture is totally different from 2, 3 and 4G, and there will be multiple networks coexist for a period of time. This will be a great challenge to the operation and maintenance personnel's ability, operation and maintenance network construction and deployment of resources coordination to the provincial core network nodes, and maintenance of interface planning.

In the exploration of business models, major operators have been actively preparing. Cui Kai pointed out to reporters that for operators, apart from the 5G value-added service innovation, more importantly, it will be the profit contribution of the B end enterprise mobile communication service brought by 5G in the future.