China Telecom Industry Report 2023-2028: All fiber broadband networks are maturing

ICC News (compiled by Nina) Recently, ResearchAndMarkets released the "China Telecom Industry Report: 2023-2028". The report predicts that despite population decline and economic uncertainty, after experiencing market expansion over the past five years, China's telecommunications industry revenue will continue to grow until 2028.

Report Overview

Globally, the telecommunications industry is proving to be the core of the national economy and necessary infrastructure services. data infrastructure has become crucial in the interconnected world, and may increasingly attract new investors such as large infrastructure funds. The report predicts that China's telecommunications industry will remain stable due to the defensive nature of the industry under the circumstances of political uncertainty and uncertain economic prospects brought about by the COVID-19 pandemic.

The increase in mobile phone penetration and the high usage rate of fixed broadband in households will drive the growth of China's telecommunications industry in the next five years. The report predicts that mobile and fixed broadband users will continue to drive the growth of the telecommunications industry from 2023 to 2028. Over the past 7 years, over 390 million people have become internet users, and it is expected that by 2028, in the next 6 years, there will be an additional 260 million internet users.

Despite population reduction and economic uncertainty, after experiencing market expansion over the past five years, China's telecommunications industry revenue will continue to grow until 2028. The Chinese government is the largest shareholder of the three telecommunications service providers in the country, and has significant influence on the strategy, network investment, and pricing of operators. It attaches great importance to the development of the country's telecommunications infrastructure, as it is closely related to the development of the national economy and the strengthening of national unity.

Capital investment

The capital expenditure of Chinese operators is cyclical, and the launch of mobile services has led to consistent investment and operator revenue growth. Capital expenditure investment peaked between 2015 and 2016, with all three operators establishing their own 4G mobile networks and dropping to a lower level in 2019. However, it will increase again from 2022 to 2028 as mobile operators invest in 5G, strengthen 4G coverage, and increase capacity to meet strong data demand. The proportion of capital expenditure to GDP skyrocketed between 2015 and 2017, and has been declining since 2017.

5G is the pillar of extensive technological progress such as autonomous vehicle, smart cities and the Internet of Things. To this end, China is accelerating its Long March towards 5G. The government encourages three operators to accelerate the construction of 5G networks and install over 2.1 million 5G base stations by the end of 2022 (according to statistics from the Ministry of Industry and Information Technology of China, as of the end of November 2022, the total number of 5G base stations has reached 2.287 million).

Mobile Users and Revenue

Between 2015 and 2021, the average annual growth rate of mobile revenue (1.3%) was lower than the growth rate of mobile service subscriptions (3.6%), highlighting the structural challenges faced by mobile operators. Wireless data profitability can only partially offset the decline in voice and SMS revenue, which has put pressure on ARPU. In addition, the reduction in dual SIM card functionality has led to a slowdown in mobile subscription growth.

Population growth is the main driving force for mobile operators' growth, and a slowdown in mobile user growth will bring long-term pressure, exacerbating the competition among the three mobile operators for fewer new customers.

According to research on mobile data pricing benchmarks, in the past four years, China has been one of the countries with the largest cost per gigabyte decline, while India has the lowest cost per gigabyte decline, only a few cents, and Singapore is still expensive.

The report estimates that by 2022, China's 5G network users may reach 555 million, and by 2028, this number may increase to over 1.5 billion (accounting for about 40% of global 5G users).

Broadband users - FTTH drives gigabit speeds

The fixed broadband market is experiencing strong growth, mainly due to China Mobile entering the market and becoming a market leader in the past six years. Fixed broadband subscriptions are very affordable in China, with ARPU lower than mobile subscriptions, which is a market singularity. In most markets, the price of fixed broadband services is usually at least twice that of mobile services.

The fixed broadband penetration rate is expected to grow moderately as China's investment in all fiber optic networks has reached maturity, with affordable packages and increasing broadband household penetration rates approaching saturation. At the same time, fixed broadband customers choose to upgrade their connections, with over 94% of users choosing FTTH subscriptions with speeds exceeding 100Mbps.