Modest growth for China’s operators

Modest growth for China’s operators

In the current business climate, where telecoms is being both boosted and undermined by Covid-19, financial results may take on even more significance than usual – but recent results reported by China’s three leading operators were fairly undramatic.

China Mobile, China Telecom and China Unicom have each published their financial results for the first nine months of 2020, and revenue changes have been largely modest.

TeleGeography’s CommsUpdate reports that China Mobile, the largest of the three, recorded a small increase of 1.4 percent from CNY566.7 billion (about $84.9 billion at a current exchange rate of 14.98 US cents to the yuan renminbi) for the first nine months of 2019 to CNY574.4 billion for the first nine months of 2020.

Breaking this down a little, turnover from telecommunications services was up 2.5 percent to CNY525.7 billion. However, revenue from the sale of products and other sources was down by 9.2 percent year-on-year to CNY48.7 billion. This was said to be due mainly to the effects of the coronavirus pandemic.

EBITDA and profit attributable to shareholders also dipped slightly but the operator put this, in part, down to expenditure related to 5G development; in fact China Mobile passed 114 million 5G package customers in September, though the term ‘package’ implies that this may include 4G customers on 5G plans.

China Mobile’s subscriber numbers remained fairly stable by the end of September: 946 million subscribers was a fall of only a million in three months. Of these, 770 million were 4G, a fall of 10 million in three months, probably reflecting some migration to 5G.

China Mobile’s fixed broadband user base remains healthy. It grew to 204 million from 197 million in the three months to end-September.

The number two player in the market, China Telecom, recorded operating revenue of CNY292.6 billion for the first nine months of this year, an improvement of 3.5 percent compared to the same period in 2019.

Unlike China Mobile, China Telecom recorded a rise in EBITDA, although this was marginal. Operating expense grew by 4.2 percent, apparently thanks to increases in network and personnel costs despite cuts in other areas. Shareholder-related profit added 1.7 percent to hit CNY18.7 billion. This impressive result seems to have been helped by a 19.1 percent reduction in financing costs and additional income from investments and share of profits from associates such as China Tower.

The number two operator also saw more 5G package subscribers in the third quarter; it added 27 million, taking its total to 64.8 million. It is reportedly targeting 80 million by the end of the year.

A decent increase in its subscriber base saw a rise from 330.4 million by the end of Q3 last year to 349.4 million mobile subscribers at the end of September this year. This includes 5G package subscribers. China Telecom, like China Mobile, saw a rise in its fixed broadband user base: it grew from 152.7 million in September 2019 to 156.8 million a year later.

There were marginal EBITDA increases for China Unicom too, though reported revenue was up 3.5 percent to CNY255.4 billion for the first nine months of 2020. Profit attributable to shareholders was CNY10.8 billion, a fairly hefty increase of 10.2 percent compared to the first nine months of 2019.

Unlike the other two operators, the number three player in the market saw its mobile user base fall slightly – to 309.18 million at end-September 2020 from 324.73 a year earlier, although its 4G customer base grew.

The company insisted that this wasn’t necessarily a bad thing as, it said, “customer acquisition cost was rigorously controlled, while the subscriber quality was improved”. The market may agree as mobile ARPU rose 2.9 percent to CNY41.6. billion.

China Unicom also saw fixed broadband access revenues rise, by this time by 3.7 percent (to CNY32.1 billion). Broadband subscriber numbers rose too, hitting 86.56 million compared to 84.45 million in September 2019. This appear to have been a positive result of the pandemic, which has encouraged rising demand, although the company also cited its promotion of smart home products as a factor.