Recently, the three major telecom operators held their mid-year performance release meetings for 2017. Aside from the overall industry performance recovery and the dual focus on China Unicom’s mixed-ownership reform, the Internet of Things (IoT) has emerged as one of the important strategic actions over the past two years, which is also reflected in the promotional materials. We can analyze the IoT layout of the three telecom operators from this.
Before comparing the disclosed IoT information, let’s look at a set of data—ICT service revenue. In the semi-annual report, China Unicom reported 7.67 billion (ICT 1.87 billion + IDC/Cloud Computing 5.8 billion), a growth of approximately 20.4%; China Telecom reported 20.9 billion, a growth of 20%; China Mobile did not disclose specific figures but mentioned a third of the market, estimating around 10 billion, with a growth of 25%.
The contribution of ICT business to overall incremental revenue (ICT revenue growth/overall service revenue increment): China Unicom is 33.2%, China Telecom is 32.9%, and China Mobile is estimated to be around 10%.
It can be said that in the ICT service market, China Telecom has a significant leading position, and it is one of the main driving forces for its growth; while China Mobile’s ICT services are one of its “four driving forces,” their importance has not yet been able to compare with the data traffic in the personal market, and they even lag behind the newly emerging home broadband market; China Unicom is in a comprehensive lagging state in personal, home broadband, and ICT, urgently needing a breakthrough.
Now, let’s delve into the topic of IoT.
In the promotional materials of the mid-year report, the keywords related to IoT appeared a total of 24 times, with China Unicom mentioning it 7 times; China Mobile 6 times; and China Telecom 11 times. In terms of disclosed information about IoT, China Telecom stands out. Do you feel a hint of something? The specific data will provide real evidence for this feeling:
1. Business Positioning:
China Unicom lists IoT alongside IDC/Cloud Computing, ICT, video services, overseas markets, internet finance, and big data as one of the seven key innovative businesses.
China Telecom proposed a “2+5” strategic layout, with 4G (5G) and optical broadband as the two main basic services, and IoT alongside Tianyi HD, Yipay, Cloud/Big Data, and “Internet+” as the five emerging businesses.
China Mobile defines the personal market, family market, government-enterprise market, and new business market as its four driving forces, with IoT included in the new business market along with the Migu series content, and other internet-based services.
From an intuitive perspective of business structure, IoT holds relatively more weight in China Telecom’s strategic system.
2. Market Performance:
In terms of the number of connections, China Mobile still leads significantly, reaching 150 million, ranking first globally; however, in terms of growth rate, China Telecom had a net increase of 13.79 million in the first half of 2017, doubling its growth rate to nearly 300% year-on-year; in contrast, China Unicom’s growth rate has slowed, and the effect of Jasper seems to be diminishing, with only 7 million new IoT connections added in the first half of the year.
Note: 1. The number of connections for China Telecom is estimated based on historical data from annual reports;
2. The number of connections for China Mobile refers to smart connections.
None of the three operators have directly disclosed IoT revenue, likely because the scale is not yet sufficient to attract investors’ attention, but both China Mobile and China Telecom have reported sequential revenue growth rates for IoT, at 94.8% and 370%, respectively. The market is in a phase of rapid growth.
In terms of market performance, China Mobile leads in scale, China Telecom shows strong growth, while China Unicom appears somewhat weak.
3. Network Progress
The three major operators are at different stages in the progress of NB networks: China Unicom has announced the launch of NB-IOT trial commercial networks, establishing the world’s largest single-city NB-IOT network in Shanghai; China Mobile has initiated network construction in 346 cities, planning to commercialize in some key cities by the end of the year; China Telecom has built the world’s largest scale commercial NB-IOT network based on 800M and 310,000 stations, and has also initiated commercialization of CAT-1, with plans to achieve eMTC commercialization in 2018.
In terms of network deployment progress, China Telecom has the clearest path and is comprehensively leading, while China Mobile is relatively stable, even somewhat conservative, and China Unicom appears hesitant regarding NB-IOT.
4. Ecological Layout
China Unicom focuses on key industries such as the Internet of Vehicles and has clearly identified IoT as one of the key areas for cooperation with large internet companies during its mixed-ownership reform; China Mobile showcases a broader industrial layout from the perspectives of eSIM and the OneNET platform; China Telecom aims to leverage the advantages of its fully covered NB-IOT network to strengthen the integration of IoT, cloud, big data, and the ICT ecosystem, forming new application advantages.
From the perspective of ecological layout, China Mobile is more diversified, making achievements in both upstream and downstream of the industry, while China Telecom views IoT as a core foundational capability for the future, and China Unicom focuses on vertical applications in areas like the Internet of Vehicles.
Strategy is about choice, a clear goal, and a series of coherent and coordinated actions. Although the three operators did not explicitly express their strategic intentions regarding IoT in the promotional materials, we can infer their strategic choices from the disclosed information:
China Unicom hopes to leverage mixed-ownership reform to harness industry capital and internet traffic resources, aiming for a breakthrough. However, the 80 billion yuan funding still seems insufficient for investment in the telecom market. Under the premise of scarce resources, focusing on high-value and high-synergy investment areas has become a wise and necessary strategic choice for China Unicom.
The Internet of People (4G, 5G) will undoubtedly be the main battlefield for China Unicom. In terms of NB-IOT, China Unicom faces frequency band challenges (900M has only 5M spectrum, and 1800M has high industry costs), and the unclear financial prospects of the NB market, leading to a contraction of its front lines, focusing on high-value IoT scenarios like the Internet of Vehicles, which is quite reasonable. It can be anticipated that before breakthroughs are made in the Internet of People market, China Unicom will maintain a lukewarm and somewhat distant attitude towards NB-IOT.
China Mobile proposed the “Big Connection” strategy in 2016, which may lead people to think that IoT is its core strategic area, as IoT is the most direct path to expand connection scale. Initial expectations were too high, leading to some disappointment regarding China Mobile’s progress in NB-IOT network construction.
The direct reason is that China Mobile uses the TD-LTE standard, which requires separate construction of the NB-IOT network, making it much more costly than a smooth upgrade on FDD, and the unclear financial prospects of NB-IOT itself lead to challenges in investment and return.
However, on a deeper level, “Big Connection” is not just about expanding the scale of connections, but also about simultaneously increasing the value of connections. In terms of market driving forces, China Mobile needs to balance its efforts across the personal, family, government-enterprise, and new business sectors.
Balance does not mean averaging, but rather guiding according to circumstances and progressing step by step. Data from the first half of 2017 shows that IoT and related ICT service revenues account for a small portion of China Mobile’s vast system, and China Mobile has been accustomed to the 2C market for many years, facing the 2B IoT and ICT market, requiring a process of reform, optimization, and breakthrough in various aspects such as capability systems and operational mechanisms.
It can be said that China Mobile’s current NB network construction is more a cautious choice aimed at market demand and competition.
China Telecom has benefited from its network standards and frequency band advantages, accurately seizing the window of opportunity brought by China Unicom’s contraction and China Mobile’s caution, making significant strides in IoT in 2017, with a strong potential for overtaking. China Telecom’s confidence comes from its extensive government and enterprise customer resources accumulated over many years.
For China Telecom, IoT, including NB-IOT, Cat1, and eMTC, is a unique network capability resource that can be integrated with IDC, cloud computing, and big data to form a new ICT ecosystem and competitive advantage, helping it expand in the government-enterprise market. It can be said that China Telecom has a broader vision in its investment in IoT—not focusing on the gains and losses of connections themselves, but rather consolidating its hidden strategic high ground—ICT service revenue. This is also why we compared the ICT service revenue data at the beginning.
Author: Pingfan
Source: IoT Jianghu (WeChat ID: iot521)
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