5G drives positive revenue performance for Chinese operators

5G drives positive revenue performance for Chinese operators

Riding on the wave of 5G, China's telecommunications industry has registered faster revenue growth in the first quarter (Q1) of 2021.

The top three operators in the country have started the year well, as China's 5G has crossed the turning point for value growth, according to the Ministry of Industry and Information Technology (MIIT).

Combined industrial revenue rose 6.5% year-on-year to 360.1 billion yuan (about $55.46 billion) in Q1, up 4.7 percentage points from the same period the previous year. By the end of March, China's three telecom giants — China Telecom, China Mobile, and China Unicom — had 1.6 billion mobile phone users, with the number of 5G subscribers reaching 285 million.

In the past, the operators’ business performance has shown slower growth or even negative growth, especially with average revenue per user (ARPU) declining year after year. The improved performance of Q1 is very eye-catching in the market. In their official financial reports, the operators mentioned 5G as a major driving factor.

In a separate statement, China Mobile, the world’s largest mobile provider by subscribers, said that it had posted operating revenue of CNY198.4 billion (USD30.5 billion) for the first three months of 2021, representing an increase of 9.5% year-on-year. It reported profit growth of 2.3 % year on year in the first quarter (Q1) of 2021. As of the end of March, mobile subscribers of the company came in at 940 million, with 5G network subscribers reaching 188.76 million.

Its compatriot China Telecom booked operating revenue of CNY106.9 billion (USD16.5 billion) for the first three months of 2021, an increase of 12.7% compared to the corresponding period of 2020. It claimed a total of 356.25 million mobile subscribers at the end of March 2021, including 111.23 million 5G package subscribers, compared to 351.02 million and 86.50 million respectively in Q4 2020.

Meanwhile, the full-service provider China Unicom registered total revenue of CNY82.3 billion (USD12.7 billion) for the three months to 31 March 2021, up from CNY73.8 billion in the same period of last year. China Unicom counted a total of 309.29 million mobile subscribers as of 31 March 2021, up from 305.81 million at the end of December 2020. Of that total, 91.85 million were 5G Package Subscribers, compared to 70.83 million three months earlier.

A recent report by GSMA noted that China will have 822 million 5G subscribers by 2025, up from 202 million subscribers at the end of 2020. According to the GSMA, China will be one of the leading countries in terms of 5G adoption by 2025, behind only South Korea, with a penetration of 5G of 67%, the U.S. (55%), and Japan (50%).

“Due to the rapid take-up of 5G in China, the region sits among the global leaders in terms of adoption. In 2020, the region added more than 200 million 5G connections, taking its share of global 5G connections to 87%. Growth in 5G adoption in the region is supported by aggressive network rollout and a growing device ecosystem. Chinese operators deployed around 600,000 new 5G base stations in 2020 and have announced plans to deploy more than that number during 2021,” said the GSMA report.

According to industry sources, the percentage of China's population that own a 5G device leads other countries hands down. China now has 341 5G-connected cities, compared to 279 in the US. Chinese telcos are expected to build over 1 million new 5G base stations in 2021, as the cost of doing so shrinks.

China has built over 718,000 5G base stations by the end of 2020, accounting for about 70% of the world's 5G base stations, according to MIIT.

China has accelerated infrastructure construction to support the development of the 5G sector in the past two years. At the end of last year, MIIT announced that China will build 600,000 base stations for 5G telecommunications networks in 2021, and will further promote 5G network construction and applications including accelerating the roll-out in major cities.

Xiao Yaqing, the minister of Industry and Information Technology, claimed that based on the number of base stations, network quality, and manufacturing levels of telecom equipment, China has taken the global lead in 5G network construction.

The country's commitments to 5G have hit tens of billions of yuan, and 5G terminal connections have topped 200 million, according to the minister. The integration of 5G into the industrial network has also made conspicuous headway, with projects underway concerning 5G plus industrial network exceeding 1,100.

According to reports, China Unicom and China Telecom are jointly deploying their standalone (SA) 5G RAN infrastructure and sharing radio frequency resources. Meanwhile, China Mobile will continuously promote a dual-mode solution (NSA and SA) to better support international roaming, and its collaboration strategy with China Broadcasting Network is under discussion.

Several research reports also indicated that the Chinese telecommunication market is arguably leading the way with the adoption of 5G. According to Global Data, APAC will be the leading region in terms of 5G adoption with 1.14 billion subscribers, accounting for 65% of global subscriptions by 2024. Of these, Chinese 5G mobile phone connections will near 500 million in 2021, accounting for 87% of global users.

According to research from Strategy Analytics, China’s rapid adoption of 5G technology is powering demand for 5G smartphones too. Apple and the domestic trio of OPPO, Vivo, and Xiaomi benefitted most as the demand exploded. OPPO, Vivo, and Xiaomi closed on Apple capturing 16%, 14% and 12% global market share in the quarter, respectively.

Global 5G smartphone shipments soared 458% YoY from 24.0 million units in Q1 2020 to a record 133.9 million in Q1 2021. Huge demand in China, a strong push from the Apple iPhone, and a wave of value-priced Android models fuelled a record quarter for 5G smartphone shipments.

Meanwhile, a recent study by ABI Research revealed that China is forecast to reach 739 million 5G subscribers by 2025. This figure would represent nearly 40% of the global market share in the 5G segment.

In terms of the annual mobile data consumption, the 5G annual data traffic in China is forecast to reach 782 exabytes by 2025, representing a share of nearly 60% of the world’s total 5G data consumption.