China Mobiles Revenue Profit Decade First Double Decline Annual 5G Investment of 24 Billion

 China Mobiles Revenue Profit Decade First Double Decline Annual 5G Investment of 24 Billion

It is worth noting that this year is the key year for the three operators to promote 5G infrastructure construction. In the first half of the year, China Mobiles capital expenditure was 85.2 billion yuan. At the performance conference, Yang Jie, chairman of China Mobile, disclosed that capital expenditure will not exceed 166 billion yuan this year, of which the investment of 5G will be 24 billion yuan.

In the preparation of 5G, compared with China Unicoms investment of 6-8 billion yuan and China Telecoms investment of 9 billion yuan, China Mobile has poured heavy money. By the end of the first half of the year, China Mobiles free cash flow was 41 billion yuan.

China Mobile, as the leader of the telecommunications industry, is stepping on the balance of investing in 5G development and reversing the decline in performance. In addition, the second half of the number-carrying network will also form a greater test of the service capabilities of operators.

China Mobile has two main revenue sources, namely, revenue from telecommunications services and revenue from sales of products. The revenue of communication services is divided into voice services, data services and other three sectors.

The first half of the years earnings showed that the companys revenue was 389.4 billion yuan (RMB, the same below), down 0.6% year-on-year; EBITDA (profit before tax and interest depreciation and amortization) was 151.1 billion yuan, up 3.6%, EBITDA rate was 38.8%, up 1.6 percentage points year-on-year. However, shareholders should account for 56.1 billion yuan of profits in the reporting period, down 14.6% year on year.

Operators continue to penetrate the user market. By the end of the first half of this year, China Mobile had 935 million mobile phone customers, a net increase of 9.98 million; the total number of cable broadband customers was 175 million, a net increase of 18.2 million. In addition, China Unicom has 324 million subscribers, China Telecom has 323 million subscribers, and the total number of subscribers of the three major operators exceeds 1.58 billion.

In order to boost performance growth, China Mobile has tried to increase the marketing promotion of 4G + mobile phone sales. But in April, the State Administration of Market Supervision launched a survey of four provincial companies of China Mobile Group to verify whether their specific sales of custom 4G + mobile phones constituted anti-competition.

It is reported that the sales actions investigated include paying subsidies to distributors and setting performance targets for mobile phone manufacturers in order to increase sales of specially customized 4G + mobile phones from four provincial companies. Up to now, China Mobile has not released the results of the investigation, but has suspended relevant sales activities.

Recently, the relevant state departments have put forward clear requirements for the three operators for carrying number to transfer network, that is, to promote the full implementation of carrying number to transfer network before the end of November this year. In the view of the industry, the number-carrying network for the highest number of customers in China Mobile has formed greater pressure. In the second half of the year, China Mobile needs to improve more services for the original customers in order to maintain the number of existing customers.

Proposed construction of 50,000 5G base stations

China Mobiles 5G+ plan has attracted much attention. At the performance conference, China Mobile disclosed that the company expects to build more than 50,000 base stations in 50 cities this year and strive to provide 5G commercial services in cities above prefectural level next year.

In June this year, China Mobile announced the acquisition of a 5G business license, the 5G commercial license, to extend the business scope of the LTE_4th generation digital cellular mobile communication service (LTEFDD) to the whole country, including voice, data and related services of the mobile Internet of Things. The 5G brand 5G+ was released.

China Mobile said that it will adhere to the coordinated development of 4G/5G, with a net increase of 300,000 base stations in the first half of the year, reaching 2.71 million, which will strongly support the development of large-traffic business. For 5G, it has launched a 5G package experience plan based on 100G traffic, specifically the 5G charging scheme, which is in the process of formulation and is expected to be launched in September.

The capital market is worried that China Mobile is facing the current trend of speed-up and fee-reduction. Will 5G network construction and fees depress the profitability level and increase the pressure of revenue and profit?

China Mobile responds that in the 5G construction, the company will make more efforts to reduce unit investment costs, control cost growth, open source and reduce expenditure in the second half of the year, strive to achieve positive growth in annual revenue, and the decline in net profit is narrower than in the first half of the year.

Great readjustment of internal organizational structure

Under enormous revenue pressure, China Mobile will continue to expand 5G infrastructure construction. China Mobiles 2019 is also the year of change.

In March this year, Yang Jie, former chairman of China Telecom, was transferred to China Mobile, replacing Shang Bing as chairman of China Mobile. The following month, China Telecom announced that the companys executive director, President and Chief Operating Officer, Mr. Craven, acting as chairman and CEO, would be in charge of the company.

Previously, Yang Jie promoted the development of mobile communication business during his tenure in China Telecom, in order to cope with the business transformation of speed up and fee reduction, and improve the competitiveness of China Telecom. Under the leadership of Yang Jie, China Telecom has become the pioneer of supply-side reforms in cloud computing, big data, artificial intelligence and so on. In 2018, data center hosting and cloud business grew rapidly.

After being transferred to China Mobile, the speed-up and fee-reduction and 5G business are the two hard bones that Yang Jie faces directly, and the internal structure of the company has also been greatly adjusted.

According to the semi-annual report of 2019, China Mobile has completed the reform plan of organization and operation system in the fields of government-enterprise, cloud service, family business and international business. The government-enterprise department is established on the basis of government-enterprise branch, the cloud capability center is established on the basis of Suzhou R&D center, and the smart family operation is established on the basis of Hangzhou R&D center. Battalion Center, set up Headquarters International Business Department.

To sum up, there are two core competencies - cloud service, family business, two overall and expanding capabilities - government-enterprise market, international market, as well as headquarters management, regional main battle, professional main building.

At the same time, the reform of the system and mechanism is also advancing. China Mobile revealed that the company is exploring market-oriented incentive mechanism to guide technology sub-enterprises to explore the implementation of equity, dividend, project follow-up and other incentives, Migu and other network terminals are also in progress.

Source: Times Weekly Responsible Editor: Zhang Mei_NF2100