Operator performance decline: Affected by business restructuring and 4G licenses

Operator performance decline: Affected by business restructuring and 4G licenses

China Unicom recently released the latest operation data: In April, China Unicom's mobile users lost 2.532 million again, while the number of GSM users lost significantly exceeded 3G and 4G new users, this is already the decline in the number of mobile users for 3rd consecutive months. Industry experts said that, compared with China Mobile, China Unicom received a 4G license late and was not enough, which is the main cause of the user decline.

Just earlier, the first-quarter financial report released by the three major operators showed that the net profit of the three operators declined collectively, which was rare in the past. China Mobile's revenue in the first quarter was 160.857 billion yuan, up 3.9% year-on-year. Its net profit was 23.83 billion yuan, down 5.6% year-on-year. This is already China Mobile's seventh consecutive quarterly net profit decline.

In the face of all the decline in the performance of the three major telecom operators, industry insiders said there are two reasons: First, starting in last June, the telecommunications industry was included in the pilot program of business restructuring and growth, which has a certain impact on the three major operators. Second, as China Telecom and China Unicom have successively obtained 4G licenses, the three major telecom giants have begun fierce competition in the 4G field, both under pressure and challenges.

However, I believe that as the three major domestic operators compete fiercely for 4G services, their future performance will continue to decline, which is a high probability event.

First, after China Unicom obtained its last 4G license, all three major telecom operators began to deploy 4G services. This requires large-scale investment and construction, and will inevitably affect subsequent profits. As of the end of last year, China Mobile had opened 0.74 million 4G base stations. In the middle of the year, China Mobile continued to invest 72.2 billion yuan in 4G network construction.

In addition, China Telecom's 4G base station construction target this year is 0.46 million, and sales spending is expected to increase by 7.4% to 8.3%, which will also affect China Telecom's future profitability to a certain extent. Of course, China Unicom is not willing to lag behind and is also trying to expand the construction of base stations. The construction of base stations will inevitably have a large investment in the early stage, and the overall profit will decline as early as expected.

Furthermore, as the entire telecom industry is currently in a critical phase of transformation and development, in addition to 4G network construction, there are also huge expenses required for customer expansion, existing customer retention, and mobile Internet development layout. The three major telecom operators have to invest a lot of energy and financial resources in Customer maintenance. This is also an important factor in the decline in the performance of the three major telecom operators in the first quarter of this year.

Finally, the State Council issued a document recently. By the end of 2015, more than 1.3 million 4G base stations will be built, achieving deep network coverage in villages and towns and more than 0.3 billion 4G users. At the same time, State Council documents said that it is necessary to promote telecom enterprises to reduce traffic fees and improve cost effectiveness through preferential targeted traffic and free-of-charge traffic. Now, on the one hand, telecom operators need to increase the construction of 4G base stations, and on the other hand, they need to reduce traffic fees to benefit the majority of users. It can be said that 2015 will be a tough year for China Telecom operators.

For China's three major telecom operators, 4G business is just getting started. The investment required in the early deployment and customer transformation and maintenance will require huge expenditures, therefore, China's telecom industry is facing a pain point of transformation and upgrading.