The War of B-end Market in 5G Era China Mobiles Elephant Turns Difficultly

 The War of B-end Market in 5G Era China Mobiles Elephant Turns Difficultly

Every reporter Liu Chunshan and every editor Liang Wu

Compared with China Unicom and China Telecom, China Mobiles mobile communications boss seems to remain unchanged. In the eyes of domestic mobile phone giants, China Mobile also maintains the pride of operators. Billion-class users, trillion-class market value, China Mobile this huge ship has been riding the wind forward.

5G construction momentum is booming, and China Mobile has a unlimited future. However, this year, according to a series of data, China Mobile is experiencing a difficult time - stagnation of user growth, disappearance of traffic dividends, and negative growth in performance. China Mobiles semi-annual report released on August 8 shows that both revenue and net profit have declined, which is the first time in nearly 20 years since its listing.

Increasing income is too difficult. Liu Xianjian, an employee of China Mobile Group headquarters, told Daily Economic News. In order to achieve performance indicators, Liu Xianjians Department has recently begun to emphasize cost reduction and efficiency enhancement, and the pressure of assessment has been increasing. Li Mingyuan, a middle-level manager of China Mobiles government and enterprise business, told reporters that since the third quarter of last year, KPI assessment has become more stringent. In the past, only the number of schemes for customers has turned into a single volume of assessment. If China Mobile still regards itself as the leader of the industry, a certain node in the future may find out when it wakes up that the original market position will be lost.

China Mobile is not unaware of the crisis. In the first half of this year, the company began to prepare for the integration of government and enterprise business. After the new chairman Yang Jie took office, he accelerated his landing. China Mobile hopes that the B-terminal business can play a new profit point.

But the reality is that China Mobile is still facing greater pressure of speed-up and fee-reduction. In the second half of the year, the number-carrying network began to be implemented. The 5G construction investment is huge and the time cycle is long. It is still difficult for the company to get out of the slump of performance. And China Mobile still has a long way to go if it wants to exert its power on the B-end and change the current situation of over-reliance on the personal mobile market.

Basic Disk begins to shake

Many years ago, there was anasymmetric regulationamong the three major operators, and China Mobile was not allowed to charge cheaper packages than Telecom and Unicom. The above-mentioned employees of China Mobile Headquarters told reporters that the relevant departments hope that the three companies can maintain a basic competitive situation and prevent one from dominating.

In terms of the number of mobile subscribers, China Mobile even surpasses China Unicom and China Telecom in total, reaching 935 million households, and its broadband service has surpassed China Telecom in just three years. You know, China Telecoms broadband elder brother status has been maintained for more than 20 years.

But the reality is that the era of operators relying on demographic dividends has passed, and China Mobile can no longer rely solely on the increase of user size to achieve performance growth.

According to the financial data, China Mobiles operating income in the first half of the year was 389.427 billion yuan, down 0.6%, and its main business telecommunications service revenue fell 1.3%, continuing the decline trend in the first quarter. By contrast, China Mobiles net profit situation is more severe. In the first half of the year, China Mobiles profit was 56.063 billion yuan, down 14.6% from the same period last year. In the same period last year, China Mobile realized a net profit of 65.641 billion yuan.

Daily Economic News reporter noted that this is the first time in nearly 20 years that China Mobile listed, the net profit data showed such a sharp decline.

As for the reasons for the decline, Dong Xin, vice president and chief accountant of China Mobile, said at the performance communication meeting on August 8 that, on the one hand, from the perspective of income, the impact of speed-up and fee-reduction and the cancellation of traffic roaming last year resulted in an overall decrease of revenue by 4.7 billion yuan in the first half of the year, which reduced profits by nearly 6%. On the other hand, the cost of rigidity increases and depreciation increases by 4.2 billion yuan. Marketing expenditure also increased, with sales expenditure increasing by 4.5%, and R&D investment in 5G vertical industry increased... All these factors have led to the decline of China Mobiles profits.

Despite the 5G Eastern Wind, China Mobiles (00941, HK) declining performance has affected stock prices. Wind data show that since mid-March this year, China Mobiles share price has been in the downward channel. On August 8, when the financial report was released, China Mobile set a new low in the past five years. Within a few months, China Mobiles share price fell to HK$62.05 from a stage high of HK$86.04 per share. On August 9, China Mobiles latest closing price was HK$64.9 per share.

Although both China Telecom and China Unicom have declined in the Hong Kong stock market, their size is not the same as China Mobile. In a few months, the market value of China Mobile evaporated by HK$410 billion, in sharp contrast to the speculation of the 5G concept in the A-share market.

Fu Liang, an analyst in the telecommunications industry, told reporters that the major change in China Mobiles semi-annual report this year was that the revenue of wireless internet access changed from positive growth to negative growth - in the first half of the year, the revenue of mobile Internet traffic in China fell by 1.5% year on year. The decline in voice revenue is expected, but mobile Internet traffic revenue has changed from growth to decline, which has become a key factor in the decline of China Mobiles revenue. This has shaken the stability of China Mobiles basic market - the personal mobile market.

Late Structural Adjustment

As a middle-level employee, Li Mingyuan did not expect China Mobiles performance to change. As early as the third quarter of last year, China Mobiles revenue slowed enough to cause concern. This has the impact of the policy requirements of increasing speed and reducing fees, but more importantly, it is the result of industry incentive competition.

In fact, China Unicom and China Telecom have made substantial concessions in the field of large traffic, which makes China Mobile have to follow up.

Never (seize) the advantage of market opportunities, always running after others, passively beaten. Every set of unified fees set by the group is a pressure on the following, rather than a sharp weapon to restrain the enemy. Liu Xianjian introduced that he had worked at the grass-roots level. Before the state vigorously advocated speed-up and cost-reduction, the marketing method had been almost used.

With the overall slowdown of the environment of the personal communication service industry, China Mobile has not failed to explore diversification. In fact, long ago, the company has implemented a four-round strategy, focusing on new businesses such as personal business, family business, government business, and Migu culture, in an attempt to diversify.

From the latest data, China Mobile still relies too much on personal mobile market revenue, accounting for more than 71% of communications services, while family business can still be seen as personal market business in essence, accounting for 7.6%. That is to say, only about 20% of the revenue is contributed to the B-end business such as government and enterprises.

This is obviously different from China Telecom and China Unicom. In 2018, the revenue of China Telecom Intelligent Application Ecosphere accelerated, contributing more than 50% to the incremental service income, while the revenue of IDC and cloud business increased by 22.4% and 85.9%, respectively.

In Fu Liangs view, the other three rounds of China Mobiles four-wheel drive have maintained growth, but still failed to offset the decline in mobile phone voice and Internet revenue, and the half-year data of total revenue of telecommunications services showed negative growth for the first time. Therefore, actively promoting the optimization of revenue structure and fostering new growth momentum become the key to China Mobiles future development.

In March this year, Yang Jie, who had been at the helm of China Telecom for many years, was appointed to China Mobile as chairman of China Mobile. Yang Jie put China Mobiles hope of increasing profits on government and business affairs. Li Mingyuan said that since the third quarter of 2018, the growth of China Mobiles personal and family customers market has slowed down, but the revenue of the government-enterprise market is also increasing, and began to erupt in 2018, which gives the group hope.

However, in the outside world, China Mobile, which has been in the government-enterprise market for many years, has been moving slowly, and has not made great efforts to develop government-enterprise business in the past. With the slowdown of personal business in the past two years, China Mobile has gradually realized that the crisis has come, but it has not prepared in advance for how to fight risks.

In the semi-annual report, China Mobile officially disclosed the major restructuring of the company, which is also the largest business restructuring and institutional reform of China Mobile in recent years. Specific adjustments are as follows: the establishment of government-enterprise department based on government-enterprise branch, cloud capability center based on Suzhou R&D center, smart family operation center based on Hangzhou R&D center, and international business department based on headquarters. We are trying to speed up the building of core competencies in cloud services and family business, and comprehensively improve the overall planning and expansion capabilities in the fields of government-enterprise market and international market.

Operators B-End Battle

Li Mingyuan still remembers the failure of bidding for a municipal project in 2015 - finally, the King of Heaven scale project was won by China Unicom. Li Mingyuan said that in the past, it was difficult for China Mobile to coordinate government and enterprise affairs, and the process of reporting to customers might be one day later than that of competitors.

China Mobile has become a small eco-circle, where people work while their worries about external life are reduced. Li Mingyuan believes that the comfort of city-level employees is also diminishing the combat effectiveness of China Mobile.

Fortunately, recent poor performance has driven China Mobile to change. Daily Economic News recently exclusively reported the major adjustment of China Mobiles government and enterprise business line - after the reform, China Mobiles government and enterprise branch has two brands, which are the government and enterprise department at home and the government and enterprise branch at abroad. This will help to straighten out the relationship between government and enterprise branches, provincial companies and industrial research institutes, emphasizing the management function of headquarters and centralized operation.

Liu Yonghua, a manager of China Mobiles government-owned enterprise branch, told Daily Economic News that before China Mobile, the top management thought emphasized professional operation and transformed the functional departments of relevant headquarters into professional companies. Independent companies will operate faster, but they will operate independently, and the government and enterprise affairs at the group level will not be better coordinated development.

From the industry point of view, China Unicom and China Telecom have their own government, enterprise and business departments, and both have been raised to the level of group headquarters. Daily Economic News reporter noted that the operators B-terminal battle has already started, China Telecom has ranked third in the public cloud service market.

In Li Mingyuans view, China Telecom has been immersed in the government-enterprise market for a long time, making its adjustment on the income side faster. In November last year, China Unicom announced the establishment of an industrial Internet product center, focusing on vertical industries and innovative areas, aiming more at the prospects of enterprise-level services.

The cooperation with BAT and other mixed partners makes China Unicom more flexible in the field of government and enterprise. As early as October 2017, China Unicom announced that it would open up cloud computing resources with Tencent and Alibaba and conduct in-depth cooperation at the cloud business level.

In fact, there are far more than three operators in the ToB market. Radio and TV system companies have already placed government and enterprise affairs in a high position, let alone the Internet enterprises such as BAT. Few people are concerned that in order to enhance the competitiveness of China Mobile in the cloud business, UCloud, a domestic cloud service company, announced in mid-last year that it had won China Mobiles E-round investment. But in the field of cloud services, China Mobiles performance is still unsatisfactory.

Daily Economic News reporter noted that China Mobiles government and enterprise business restructuring more emphasis on the industrial research institutes product, market capacity, some production functions assigned to the industrial research institute. In particular, the Suzhou Research Institute and the Shanghai, Chengdu and Xiongan Industrial Research Institute have been positioned to only do research, regardless of the product,No matter the health care. Developed things come out, you love it or not. Now they are required to integrate R&D and operation and add operation into it. Liu Yonghua revealed.

But it is also difficult to do B-end business such as government and enterprise. Whether China Mobile can successfully transform is still unknown. Liu Yonghua has worked in the government-enterprise market for many years. In his opinion, there is a huge space for the government-enterprise market, but the characteristics of each field are different. Every industry and every enterprise has its own specific needs. It takes time to settle into the B-end market and get a better understanding of the industry. This is totally different from the standard personal business.

The ups and downs of 3G to 5G

In 2010, Li Mingyuan jumped from China Telecom to China Mobile. At that time, China Mobile had 500 million subscribers, about half of the current number. In Li Mingyuans view, in the decade of 3G and 4G era, China Mobile has not launched a new brand of resounding Dangdang. Global Tong, Shenzhou Xing, Moving Zone and so on are old things ten years ago. China Mobile needs brand remodeling.

Li Mingyuan was in the era of 3G when he joined China Mobile. China Mobile is developing its own TD-SCDMA technology with independent intellectual property rights, and has also suffered from TD-SCDMA.

In fact, the utilization rate of TD-SCDMA was not enough at that time, and China Mobile, which subsidized 3G terminals, also spent a lot of money. In the era of 3G, Qualcomm is reluctant to produce TD-SCDMA chips. Apple Mobile does not support China Mobiles network. China Mobile has lost many users. From 2009 to 2013, faced with the fierce attacks of China Unicom and China Telecom, China Mobile in the era of 3G even had a situation of almost no backlash.

On December 4, 2013, the Ministry of Industry and Information Technology issued TD-LTE4G licenses to all three operators. China Mobile devoted all its enthusiasm to the construction of 4G, trying to make up for the shortcomings of the 3G era as soon as possible. In the whole year of 2014, China Mobile has developed nearly 100 million 4G subscribers; in 2015, China Mobiles 4G subscribers exceeded 300 million; today, China Mobiles 4G subscribers have exceeded 700 million.

At present, 5G construction is in full swing, and China Mobile is not allowed to hesitate in the competition. Daily Economic News reporter noted that Yang Jie made it clear in the semiannual report communication meeting in the past few days that China Mobile planned to invest 24 billion yuan in 5G this year and build more than 50,000 5G base stations in the year, slightly higher than expected. However, the huge cost of 5G investment has also raised concerns about the revival of China Mobiles performance.

Yang Jie revealed that the next three years will be the peak period of China Mobile 5G investment, but the annual total capital expenditure will not fluctuate significantly. In addition, Yang Jie said that in the development of 5G, China Mobile did have contacts and discussions with China Radio and Television, seeking to build a co-construction and sharing cooperation model.

In the industry, China Mobile seems to be waiting for SA (a 5G networking mode) industry chain to mature early next year, and then large-scale 5G base station construction. 5GSA networking can support the application in vertical industry better, which is conducive to the development of 5G government business.

Source: Daily Economic News Editor: Ding Guangsheng_NT1941