China Telecom is the last of the Big 3 Chinese carriers to issue its mid-year report (see below), revealing stronger than expected financials and operational metrics. Later this week, Alibaba's mid-year report is due, hopefully providing equally deep insight into its cloud business and the larger market for data center infrastructure in China.
Some key trends observed on the telecoms side for 1H2018:
- China Mobile is slowing, while China Unicom and China Telecom appear reinvigorated.
- 4G network construction has been mostly completed and CAPEX levels are declining at all 3 carriers.
- Mobile data has entered its highest period of growth, reflecting the bulk of the subscriber base migrating onto 4G. China Telecom reports +349% yoy growth!
- Infrastructure sharing through the newly-public China Tower joint venture company is having a measurable effect in reducing OPEX. All three carriers talk about driving down tower costs even more, especially as each carrier has in excess of 1 million base stations in operation.
- ARPU levels are very low compared to developed economies.
- China Telecom gaining traction with a triple play option combining gigabit home broadband, TV service and 4G mobile service.
- The government intervention to force/lure investment from the nation's most successful tech companies in the floundering state-owned China Unicom is successful in this early stage.
- The end of provisional roaming tariffs is a welcome bonus for users but a direct hit on carrier revenues.
- All three top carriers have 5G field trials underway in multiple cities, with pre-commercial user trials expected in 2019, followed by commercial launches in 2020.
- None of the carriers reported significant network upgrade disruptions arising from ZTE's troubles in Q2.
- None of the top three Chinese carriers has a viable overseas strategy, either through investments in other operators (Singtel's model) or direct subsidiaries (Orange or Telefonica's model). This is perhaps the missed opportunity of the past decade but understandable given the enormous challenge of modernizing their home market. On the other hand, the equipment supplied by Huawei and ZTE is now well entrenched in carrier networks all over the world, so the influence of China on the global telecoms market is considerable.
