4G stimulates operators’ transformation towards the Internet

The half-year financial reports of the three major operators have been released, and the growth of traffic revenue has become the main driving force for revenue growth: China Telecom achieved emerging business revenue of 41.3 billion yuan in the first half of the year, a year-on-year increase of 30%; China Mobile's mobile data traffic in the first half of the year increased by 91.4% year-on-year, and wireless Internet business revenue increased by 51.8% year-on-year; China Unicom's mobile phone user data traffic in the first half of the year also increased by 82.1% year-on-year.

“Cash Cow” Conversion in Progress

From voice to SMS, and from SMS to data services, telecom operators are rapidly improving the industry market position of emerging businesses.

According to China Telecom's financial report, China Telecom achieved operating revenue of RMB 166 billion in the first half of the year, a year-on-year increase of 5.3%; after deducting mobile terminal sales revenue, operating revenue was RMB 149.4 billion, a year-on-year increase of 7.3%; net profit was RMB 11.4 billion, a year-on-year increase of 11.8%; IDC business revenue was RMB 4.8 billion. It is worth mentioning that the company's 3G mobile Internet traffic in the first half of the year increased by 80% year-on-year, and emerging business revenue reached RMB 41.3 billion, a year-on-year increase of 30%. At the same time, China Telecom disclosed that since the official launch of the service at the end of July, the number of 4G users has been about 600,000 so far. Wang Xiaochu, chairman of China Telecom, said that most ARPU values ​​are around RMB 100, which is a good response.

According to industry insiders, China Unicom's profitability is rising rapidly, and traffic management has also become an important driving force. Data shows that in the first half of this year, China Unicom's revenue was 149.57 billion yuan, a year-on-year increase of 3.6%; net profit increased by 25.8% year-on-year to 6.69 billion yuan, doubling in two years.

With the time difference between the issuance of the two types of licenses, China Mobile has seized the golden window for the development of traffic management. In the first half of the year, China Mobile's mobile data traffic increased by 91.4% year-on-year, and wireless Internet service revenue increased by 51.8% year-on-year, accounting for 24.2% of communication service revenue.

The "new" brought by the digital changes in the semi-annual financial report is also the initial result of the operators' deepening transformation and innovative business revenue. Obviously, operators are standing at a critical crossroads of transformation, and traffic management has become their most valuable operating factor.

Traffic management becomes a variable for success or failure in transformation competition

The reason why traffic management has attracted so much attention and become a new competitive weapon for operators is that traffic is an important link for operators to connect users and the industrial chain.

4G has been commercially available for half a year. The improvement of mobile communication network speed is of great significance to mobilizing user data consumption and improving APRU value. Public data shows that in the first half of this year, mobile Internet access traffic has grown rapidly. The mobile Internet access traffic of the three operators reached 867 million GB, a year-on-year increase of 52.1%, which is 25 times the growth rate of mobile voice calls. Since the beginning of this year, each household has used 6M more traffic per month on average, and mobile Internet traffic has reached 728 million GB, a year-on-year increase of 93.2%. According to the latest news, from the issuance of TD-LTE license on December 4 last year to the official commercialization of more than 8 months, China's 4G users have exceeded 30 million. Experts said that data service experience may determine the success or failure of 4G competition. Therefore, focusing on packages and data applications, operators have made frequent moves in traffic management, and the launch of "traffic red envelopes" and free traffic is a strong proof.

The increase in traffic will reduce the operator's tariff, but it will bring more profits to the operator as a whole, and open up a mutually beneficial linkage with the industrial chain. For example, China Telecom launched the Traffic Treasure - in the past, Internet traffic could not be circulated or transferred to others, and it was cleared at the end of the month. Traffic Treasure solves these pain points of users and allows traffic to flow freely. According to previous statistics from Cisco, the traffic generated by 4G networks is 14.5 times that of non-4G networks. For the industrial chain, there are also positive data that continue to rise - the upgrade of 4G networks has driven the shipment of smartphones in the first half of 2014 to nearly 200 million units, and its share in the total shipment of mobile phones has reached 87%. All these show that the measures taken by operators in terms of tariff innovation and comprehensive follow-up of the terminal industrial chain have in turn stimulated user demand.

"Internet thinking" stimulates the potential of 4G

The three major operators all mentioned a key word in their half-year announcements, which is "reform and transformation." One of the tasks of reform and transformation is to stimulate the potential of my country's 4G. Internet thinking may help operators "make up for their shortcomings."

In terms of specific measures, operators need to take concrete actions in business innovation and mechanism reform. Telecom expert Fu Liang believes that from the perspective of profit and income, traffic management is the foundation, but if the three major operators simply "bet" on traffic management, the room for revenue growth is still limited. If they want to seek higher profit growth points, they need to expand to the downstream of traffic management, such as some mobile Internet applications. At present, China Telecom has clearly defined the direction of Internet transformation, which can be seen from China Telecom's exploration of innovation incubation and competition and cooperation with OTT. China Telecom hopes to achieve a revenue share of more than 50% for new services such as traffic management and Internet in 2017. Zhang Yingjie In terms of supervision, the industry calls on the supervision to expand the scope of FDD in a timely manner and promote hybrid networking. FDD licenses are still waiting to be issued, but the scope of hybrid networking trials has begun to expand. China Telecom and China Unicom recently announced that they have obtained approval from the Ministry of Industry and Information Technology to expand the scope of TDD/FDDLTE hybrid networking trials from 24 cities to 40 cities, all of which are provincial capitals and major cities.