China’s big three mobile operators, which together have 1.3 billion mobile connections, reported mostly upbeat results for 2016 and spectacular 4G subscriber numbers.
China Mobile and China Telecom both had solid growth in mobile service revenue and would have seen strong profit increases if one-off gains from the transfer of their tower assets in 2015 were excluded. Number two China Unicom saw mobile revenue return to growth and nearly matched rival China Telecom’s 4G additions for the year.
The number of 4G additions in China alone last year accounted for 46 per cent of the world’s 4G net adds. According to GSMA Intelligence, global 4G subscribers increased by 754 million in 2016 to 1.84 billion.
China’s three operators added 347 million 4G connections in 2016, taking the country’s 4G total to an impressive 762 million. Both Unicom and China Telecom more than doubled their 4G connections last year. The three installed 1.1 million 4G base stations during the year, and 4G penetration rose to 57 per cent.
China Mobile, with a 64 per cent market share of total mobile connections, after adding 223 million 4G connections in a single year, is targeting another 100 million 4G additions in 2017, which would give it well over 600 million LTE users.
The marker leader rolled out 400,000 4G base stations during the year, taking its total to 1.5 million sites. Unicom added 337,000 4G sites to bring its total to 736,000, while Telecom deployed 380,000 to end the year with 890,000 4G sites. The third ranked player plans to add another 270,000 4G sites by the end of 2017.
As their 4G rollouts near completion, Unicom slashed its 2016 capex by 46 per cent from the previous year to CNY72 billion, while Telecom reduced its spend by 11 per cent to CNY96.8 billion and plans an 8 per cent reduction in 2017. China Mobile will cut its 2017 capex budget by 6 per cent to CNY176 billion.
The end of roaming
Overshadowing their generally positive 2016 figures was the government’s March announcement of a new round of speed upgrade and tariff reduction policies which require operators to eliminate domestic long-distance and roaming tariffs by October.
China Mobile expects the domestic roaming policy to lead to a CNY4 billion reduction in operating revenue each quarter and a reduction in internet access tariffs for SMEs and international long-distance tariffs to have a CNY3 billion impact per quarter. China Unicom’s CEO said he expects the tariff cuts to reduce its quarterly revenue by about CNY1.6 billion, which could impact its budding recovery.
Those estimates translate to 2 per cent to 4 per cent of revenue — a potentially significant reduction, but don’t expect that to slow the country’s march to one billion 4G connections later this year or in early 2018.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.