Over the last year, there has been a growing debate around 5G monetization. The recent quarterly results of the Chinese service providers, including China Mobile and China Unicom, validate that the 5G large-scale commercial operators have performed well on the back of an increase in 5G Average Revenue Per User (ARPU).
China Mobile, the country’s largest telecommunications company, recently reported that the total number of 5G package customers reached 189 million, and the total number of 5G network customers touched 92.76 million in the quarter ending March 31, 2021. The service provider’s turnover increase of 5.2% to touch CNY177.7 billion was also fuelled by a 67% increase in handset sales to CNY20.8 billion. This was on the back of the availability of a wider range of 5G models at more affordable prices.
In 2020, for China Telecom, 5G users generated a much higher ARPU of CNY65.60 compared with CNY44.10 for its overall user base, which experienced a slight decline year-on-year.
On the other hand, China Unicom’s 5G package users increased by 21.02 million to touch 91.85 million in the first quarter of 2021. This was a crucial factor in driving up the ARPU of mobile billing users by 11.5% year-on-year to CNY44.6. Significantly, mobile service revenue recorded a growth of 8.8% over the previous year to touch CNY41.071 billion in the quarter ending March 2021.
Increasing Investment: The Winning 5G Strategy
These are heartening developments for the telecommunications industry, which has been raising questions about 5G monetization for some time now. What is of significance is that the Chinese service providers made massive investments in developing the 5G ecosystem and so are now in a position to reap the benefits.
According to GlobalData, Chinese telecom operators, including all three telcos, along with infrastructure provider China Tower, have invested a massive CNY197.3bn (US$27.8bn) on 5G technology in 2020.
A recent GlobalData’s Mobile Broadband Forecast Model says that 5G connections in China will reach an estimated 1.5 billion by 2025, growing at a CAGR of 31.9% between 2020 and 2025, as 5G infrastructure investment gains momentum in the country. The 5G subscriptions will account for a massive 62.5% share of the total mobile subscription by 2025.
In spite of the outbreak of the COVID-19 pandemic last year, China Mobile maintained its investment density and invested $27,784 million, 8.9% more when compared with the previous year.
Similarly, China Unicom increased its investment by 20% last year to invest $10,400 million, and China Telecom boosted investment by 9.3% to touch $12,989 million in 2020. China Telecom plans to increase this budget in 2021 as well.
This strategy is in contrast with other telcos in other regions. South Africa-based MTN invested just $1604 million in 2020, now plans to invest $1.87 billion this year, an increase of 2%.
Maintaining 5G Investment To Boost Growth
The Chinese telcos plan to maintain investment intensity in 5G networks in 2021 as well. China Mobile has stated that it will continue with its strategy of "promoting digital and intelligent transformation and achieving high-quality development," focusing on the core of the "four threes" strategy, in-depth implementation of the "5G+" plan.
In the same vein, China Unicom believes that network construction and sharing helped it achieve remarkable results. It will continue to promote the growth of the 5G ecosystem and take concrete steps to bring new 5G use cases to the market.
China Telecom plans to invest CNY39.7 billion ($6.1 billion) for 5G network expansion, slightly more than CNY39.2 billion ($6.05 bn) in 2020. Together China Telecom and China Unicom deployed 300,000 5G sites across the country. This year, the two service providers hope to maintain the expansion intensity to offer complete 5G coverage by setting 700,000 sites by the end of the year. This is also likely to give a significant boost to the country’s economy.
The service providers in the other regions must take a cue from the Chinese telcos to continue investing in the development of the 5G ecosystem to reach the next level of growth. It will enable them to grow their business even as they extend the benefits of ultra-high-speed broadband and extremely low-latency networks to more people.