Why is there negative growth in telecom users?

According to China Telecom's performance, the company added 520,000 net users in August, but as of the end of August, it still lost 5.02 million mobile users this year, while China Unicom added 14.02 million net users. However, in general, the three major operators have a trend of slowing user growth. Take China Mobile as an example. In 2013, the number of China Mobile users increased by 8.0% year-on-year, while in the first half of this year, the year-on-year growth was only 3.05%. Why has China Telecom's mobile users decreased instead of increased this year?

Mobile phone market saturation

The slowdown in the growth of operators' users is due to the fact that the mobile phone market is close to saturation in terms of the broader market environment.

In 2009, the penetration rate of mobile phones in my country was 56%. Since 2009, the penetration rate of mobile phones has increased by nearly 10% each year, and in 2013 it has reached 90%.

By this year, the market has reached its ceiling, and almost everyone except the elderly and young children has a mobile phone. Therefore, it is no longer feasible for operators to maintain growth by adding new phone users.

4G was launched late

The details of China Mobile's 4G strategy are as follows: after the Ministry of Industry and Information Technology issued the TD-LTE license in December last year, China Mobile has been in a leading position in terms of the number of users, number of base stations, types of terminals, number of cities covered and other indicators in the first half of the year, due to its first-mover advantage in the standard and its strategic promotion of 4G mobile phone business.

Compared with China Mobile's preemptive move, China Telecom was slow in its 4G development. On June 27, the Ministry of Industry and Information Technology approved China Telecom and China Unicom to conduct FDD-LTE and TD-LTE hybrid networking trials. At this time, China Telecom officially released mobile 4G packages. On July 15, China Telecom officially released numbers in 16 pilot cities. On August 28, the number of cities for hybrid networking trials reached 40.

However, the Ministry of Industry and Information Technology has not issued a formal FDD network license, and China Telecom can only conduct trials in limited cities. The 4G terminal industry chain has yet to be improved, which has restricted the development of its 4G business. However, China Telecom is also accelerating the layout of 4G terminals in the second half of the year. It is expected that by the end of the year, about 70 Tianyi 4G mobile phones will be available on the market.

Policy Impact of Business Tax to VAT Reform

On April 30 this year, the Ministry of Finance and the State Administration of Taxation issued the "Notice on Including the Telecommunications Industry in the Pilot Program of Replacing Business Tax with Value-Added Tax", incorporating the telecommunications industry into the scope of the business tax replacement with value-added tax.

This means that the days of the telecom industry paying 3% business tax are a thing of the past, and in the future, differentiated value-added tax rates of 6% and 11% will be implemented. Some experts pointed out that the profits of the three major operators will drop sharply in the short term.

The decline in profits has caused operators to reduce their advertising and marketing expenses, making it difficult to support the previous high user subsidies. This has reduced their attractiveness to users and thus affected user expansion.

User Choice

Although China Telecom's net user growth was negative in the first half of the year, the number of 3G users was increasing, which shows a change in the user structure.

Many users do not have a great demand for 4G. They have been used to the speed and charges of 3G for a long time. Although the speed is faster than 4G, the high charges make it difficult for users to switch, especially when terminals are still scarce. Moreover, China Telecom's 4G network has just started to be built on a large scale, and China Mobile's 4G network is relatively mature, so users are mostly waiting and watching.

Although China Telecom's 3G users have increased, this cannot offset the speed of its user loss. How to use 4G to win back users may be a question that China Telecom needs to consider.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.