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Traffic business revenue growth innovation low China 5G ushered in a new threshold

Author/ IT Times reporter Qian Lifu

Editor/Qian Lifu gets kicked

Recently, the Ministry of Industry and Information Technology released the "Statistical Bulletin of Communications Industry in 2022". Overall, the growth trend of China's communications industry in 2022 is improving, the network infrastructure capacity continues to increase, and the scale of connected users continues to expand.

However, it should be noted that while the overall revenue of telecommunications business shows rapid growth, the performance of mobile data traffic business segment is difficult to satisfy, the revenue growth has reached a new low over the years, the proportion in the overall revenue is further reduced, and the driving effect on the industry revenue growth is further weakened.

According to another indicator-monthly average traffic (DOU) of mobile users, although it will maintain growth trend in 2022, the growth rate is rapidly decreasing. According to Fu Liang, an independent analyst in the telecommunications industry,"5G subscriber growth has not significantly driven per household traffic growth."

China's 5G has been commercially available for more than three years, and now there is a new low growth in traffic revenue and a sharp decline in per household traffic growth, indicating that China's 5G development has entered a new critical period. To break through this new barrier, application breakthrough is the key, thus driving 5G and the whole traffic consumption level, and fully releasing 5G dividends.

The "troika" has an internal imbalance of export, investment and consumption, which is called the "troika" that drives the growth of national economy. For the telecommunications industry, there are also "troikas" inside: fixed Internet broadband access services, mobile data traffic services and emerging services.

However, the performance of the "troika" is intensifying differentiation. The emerging businesses represented by data center, cloud computing, big data and Internet of Things have grown very strongly in recent years, and their contribution to the revenue growth of telecom business has been greatly increased. In sharp contrast, the growth rate of mobile data traffic revenue is decreasing, and the driving effect on telecom revenue growth is weakening day by day. The fixed Internet broadband access business segment performed relatively smoothly.

In 2022, China's telecom business revenue totaled 1.58 trillion yuan, an increase of 8% over the previous year. The biggest "contributor" to revenue growth is the emerging business sector, driving telecom revenue growth by 5.1 percentage points. In 2022, China completed a total of 307.2 billion yuan of emerging business revenue, an increase of 32.4% over the previous year, accounting for 19.4% of telecom business revenue from 16.1% of the previous year. Looking back five years ago, in 2017, emerging business revenue accounted for only 2.4% of telecom business revenue.

Compared with the rapid growth of revenue from emerging businesses, the mobile data traffic business, once the "main force" driving revenue growth, has fallen into a state of low revenue growth. According to the data, in 2022, China completed 639.7 billion yuan of mobile data traffic revenue, with an increase rate of only 0.3%, driving the growth of telecom business revenue by only 0.1 percentage point. Also compared with 2017, revenue increased by 26.7% in that year, contributing 152.1% to the revenue growth of the telecommunications industry.

"Rome wasn't built in a day. "In the initial stage of 4G commercial use, mobile data traffic revenue maintained a rapid growth trend, with a growth rate of 38.3% in 2016 and 27.6% in 2017. However, with the intensification of industry competition, 4G traffic dividends were released rapidly. In 2018 and 2019, mobile data traffic revenue growth declined precipitously, with an increase of only 1.9% in 2019. It will be further reduced to 1.8% in 2020, which can be called "freezing point."

In 2021, driven by the consumption of 5G traffic and the significant increase in the penetration rate of contactless services under the new crown epidemic, the growth rate of mobile data traffic revenue in China rebounded.

In 2021, the 5G diversion ratio in many places has crossed the critical point of 30%, that is to say, the proportion of 5G traffic in the total traffic of the whole network exceeds 30%, which means that 5G begins to really pick up the girder. Driven by 5G, China's mobile Internet access traffic and monthly average access traffic (DOU) and other indicators showed rapid growth trend in 2021, with the former increasing by 33.9% year-on-year and the latter increasing by 29.1% year-on-year. Driven by these factors, China's mobile data and Internet business will realize "V-shaped reversal" in 2021, and the revenue growth rate will increase from 1.8% in the previous year to 3.3%.

However, this is only a "flash in the pan." The growth rate of mobile data and Internet business did not continue to increase in 2022, but turned down rapidly, hitting an all-time low, up 0.3% from the previous year and almost stagnating.

At a time when revenue growth has fallen to historic lows, Fu Liang has observed another change: the growth rate of mobile users 'per-household traffic is declining rapidly.

In 2022, the average monthly mobile Internet traffic (DOU) reached 15.2GB /household·month, an increase of 13.8% over the previous year. In 2021, the increase was 29.1%, and in 2020 it was 32.4%. "The growth of 5G users has not significantly driven the growth of traffic per household. From the monthly data of 2022, even some months of DOU value has shown negative growth,"Fu Liang thinks.

Another key indicator, 5G ARPU, is also falling. According to the financial report for the first half of 2022, China Mobile's 5G ARPU dropped from 88.9 yuan in the first half of 2021 to 85 yuan in the first half of 2022, as did almost two other operators.

Under the influence of the decline of 5G ARPU, the ARPU of mobile users of operators also showed a month-on-month decline. Take China Mobile as an example. In the third quarter of 2022, the ARPU of China Mobile's mobile users was 50.7 yuan, a decrease of 1.6 yuan compared with the second quarter of 2022.

On the one hand, the growth rate of average traffic per household is obviously reduced, on the other hand, the ARPU of users is decreasing. Under the influence of both aspects, it is inevitable that the growth of mobile Internet access traffic revenue will further slow down.

"Use up" has become a breakthrough. The growth rate of DOU decreases, the ARPU of users decreases, and the revenue growth is at a new low. The development of mobile data traffic business in China is facing severe pressure. 5G is seen as the key to solving the problem, and "application" is the way to solve it.

"Now we have entered a critical period, whether in the field of to C or to B, so that everyone can better enjoy the application brought by 5G. For ordinary users, I have a 5G mobile phone, how can I enjoy different applications and experiences from 4G from 5G mobile phones? This is actually an issue that operators are concerned about and pay more attention to. "Wu Lidong, vice president of Ericsson Northeast Asia, said in an interview with IT Times not long ago.

"Operators will certainly not keep 5G network utilization at a low level," Fu Liang believes that 5G in the future should drive traffic levels to increase significantly. Moreover, for 2023, an advantageous condition is that as epidemic prevention and control shifts to "Class B Management," increased mobility of personnel will also stimulate the increase of flow consumption level. However, the most important thing is the word "application," which should be used to stimulate the increase of traffic.

Wu Lidong believes that in the field of to B, China's 5G application innovation has been in the forefront of the world,"no other country has done it." However, in the field of to C, operators in some countries do better than Chinese operators."For example, SKT in South Korea has built a virtual world on which new products can be released, games can be played, and even some digital currencies can be applied."

The supply capacity of 5G network is strong, industry personage thinks, should more fully exploit 5G capability, such as providing network slice ability for individual users, providing better 5G network quality guarantee when users carry out large video transmission and network games. "There can be a button on the phone that users can turn on to call for better network service levels, or temporary acceleration, and turn off at any time when they don't need it," said Zhang Yongtao, vice-president of Ericsson's China technology department. For operators, this also brings new business models, rather than just offering undifferentiated 5G packages.

Operators need to pay more attention to the 5G consumer market, so that users can fully feel the charm of 5G applications and maintain enthusiasm for 5G. "I think new features and services like this should be actively promoted, which will drive more people to use 5G. "Wu Lidong said.

Fu Liang believes that operators have not made excessive adjustments in 5G tariff policies in recent years, and should further lower the threshold for users to use,"for example, let users spend 10% more money, you can use 50% and 100% more traffic to stimulate users to use more." "China's 5G has been commercially available for more than three years, with remarkable results. The network scale and user scale rank first in the world. Next, 5G needs to be used more, so as to fully release 5G dividends.

This article comes from Weixin Official Accounts: IT Times (ID: vittimes), by Qian Lifu

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