3 month is coming to an end. With the disclosure of the annual report by China Mobile, the performance of the three major operators in 2021 has been fully released, and the development pattern of the industry has basically surfaced
China Mobile continued to rank first in the industry with sales of 848258 billion yuan, China Telecom Corporation Limited(601728) ranked second with operating revenue of 434.16 billion yuan, China United Network Communications Limited(600050) followed by revenue of 327.85 billion yuan.
Overall, the revenue and net profit of the three operators achieved double growth. Among them, the revenue growth rate of China Mobile reached 10.4%, a new high in recent years The revenue and profit scale of China Telecom Corporation Limited(601728) and China United Network Communications Limited(600050) are far less than that of China Mobile, but the growth rate is more significant, and the net profit attributable to the parent company has increased by 24.4% and 14.2% year-on-year respectively.
So, what are the differences in the business development of the three operators? Why is there a significant gap in profitability?
performance scale varies greatly
In 2021, China Mobile achieved an operating revenue of 848258 billion yuan, a year-on-year increase of 10.4%, greatly exceeding the 2.97% in 2020, a new high in recent years. The net profit attributable to the parent company was 115937 billion yuan, a year-on-year increase of 7.5%.
Or affected by the financial performance, on March 24, China Mobile’s A-share trend was strong, reaching 69.62 yuan, a new high since the listing of A-share. As of the close, China Mobile A shares closed at 66.75 yuan, up more than 3%.
In this month, China United Network Communications Limited(600050) and China Telecom Corporation Limited(601728) also released their annual reports one after another.
In 2021, China Telecom Corporation Limited(601728) achieved a revenue of 434159 billion yuan, with a year-on-year increase of 11.3%; The net profit attributable to the parent company was 25.952 billion yuan, a year-on-year increase of 24.4% China United Network Communications Limited(600050) achieved an operating revenue of 327854 billion yuan, a year-on-year increase of 7.9%; The net profit attributable to the parent company was 6.305 billion yuan, a year-on-year increase of 14.2%.
It can be seen from the annual report that there is a huge gap in the net profit attributable to the parent company of the three operators, from 115937 billion yuan of China Mobile to 6.305 billion yuan of 60005 which has even far exceeded the difference in income scale.
Why do both operators look so different in their ability to make money?
In terms of cost, in 2021, the operating cost of China Mobile was 603.9 billion yuan, an increase of 13.2% over 2020, and the proportion of operating cost in operating revenue was 71.2%. Among the main business costs, depreciation and amortization was 184.8 billion yuan, an increase of 12.3% over the previous year. China Mobile said that the expansion of asset scale was mainly due to the company’s accelerated network upgrading, transformation and layout. At the same time, the residual value rate of some assets was adjusted to 0, increasing the depreciation of fixed assets for the whole year by about 9.4 billion yuan. Excluding the influence of residual value rate adjustment factors, depreciation and amortization increased by 6.6%.
In 2021, China Telecom Corporation Limited(601728) operating cost was 307.34 billion yuan, an increase of 12.9% over the same period last year, of which depreciation and amortization was 88.151 billion yuan, accounting for 28.7% of the operating cost. In this regard, China Telecom Corporation Limited(601728) said that the cost increase was mainly due to the company’s continuous improvement of network quality and capacity to support the rapid development of 5g, government enterprises and emerging businesses. At the same time, the sales volume of 5g mobile phones and other mobile terminals increased significantly.
In contrast to China United Network Communications Limited(600050) , in 2021, the cost of the company even exceeded China Telecom Corporation Limited(601728) to 309.24 billion yuan, with a year-on-year increase of 8.9%, and its proportion in operating revenue increased from 93.45% in 2020 to 94.32%. The depreciation and amortization is 85.66 billion yuan, accounting for 26.13% of the operating cost. In addition, in 2021, China United Network Communications Limited(600050) network operation and support cost was 53.09 billion yuan, with a year-on-year increase of 14.7%, and its proportion in operating revenue changed from 15.23% in 2020 to 16.19%, which was mainly affected by the growth of housing equipment rental cost, network operation and maintenance cost and energy consumption cost.
business development has its own emphasis
From the perspective of income composition, China Mobile’s business mainly focuses on four sectors: individuals, families, government and enterprises and emerging markets, of which personal market income is the basic sector of its revenue.
In 2021, China Mobile’s personal market reversed the downward trend and achieved positive growth. Its revenue increased by 1.4% year-on-year to 483.4 billion yuan, accounting for more than 50% of its revenue. Among them, there were 957 million mobile customers, a net increase of 14.97 million, and 387 million 5g package customers, a net increase of 222 million, with a penetration rate of 40.44%. In addition, driven by the value growth of customer upgrading 5g and integrated operation, mobile ARPU increased to 48.8 yuan, a year-on-year increase of 3.0%.
In contrast, China Telecom Corporation Limited(601728) in the same year, there were 372 million mobile users, a net increase of 21.41 million; 5g package users reached 188 million, the user penetration reached 50.4%, and the ARPU of mobile users was 45.0 yuan, a year-on-year increase of 2.0%.
China United Network Communications Limited(600050) by the end of 2021, there were about 317 million mobile billing users, with an annual cumulative net increase of 11.3 million; 5g package users reached 155 million, with an annual cumulative net increase of 84.1 million, and the penetration rate exceeded the industry average, reaching 48.9%.
It can be seen that China Mobile has maintained a leading position in terms of revenue, net profit and user scale, and has ranked first in terms of 5g users.
However, the reporter noted that in recent years, 5g business has been the focus of the layout of the three operators. Compared with the 5g package user penetration of China Telecom Corporation Limited(601728) and China United Network Communications Limited(600050) , China Mobile, as the “boss”, lags behind.
Fu Liang, an independent IT Analyst, said in an interview with the international finance news that the penetration rate of 5g package users of China Mobile lags behind its peers, mainly due to its large number of old users and limited penetration space. “At present, some Chinese mobile users are using packages 10 years ago”.
strong growth in emerging businesses
The financial report shows that in addition to the basic business, the three operators are increasing their investment in emerging businesses in 2021, and the corresponding proportion of revenue in this sector has increased significantly.
In 2021, China Mobile’s digital transformation revenue reached 159.4 billion yuan, a year-on-year increase of 26.3%, and its contribution to the increment of main business revenue reached 59.5%.
The digital transformation income of China Mobile includes income from new business (and Caiyun, etc.) in the personal market, income from smart family value-added business in the home market, income from dict in the government enterprise market, income from the Internet of things, income from special lines, and income from emerging markets.
In its annual report, it said that on the whole, revenue growth has broken through the inflection point, and the “second curve” of digital transformation revenue is leading the company to explore a broader market space in the blue ocean of information services.
In 2021, China Telecom Corporation Limited(601728) in the industry, the digital business revenue reached 98.9 billion yuan, with a year-on-year increase of 19.4%, significantly higher than that in 2020. Tianyi cloud’s revenue maintained rapid growth, reaching 27.9 billion yuan, doubling its revenue.
When analyzing the reasons for revenue growth, China Telecom Corporation Limited(601728) is more outspoken, mainly because the company grasps the opportunity of economic and social digital transformation, gives full play to the advantages of cloud network service ability, speeds up the development of industrial digital business and strives to promote the development of economies of scale.
On March 17, Ke Ruiwen, chairman and CEO of China Telecom Corporation Limited(601728) disclosed at the company’s 2021 annual performance briefing that China Telecom Corporation Limited(601728) will actively explore the possibility of Tianyi cloud’s spin off and listing under the condition of meeting the regulatory rules.
Although the revenue scale of industrial Internet business is less than that of China Mobile and China Telecom Corporation Limited(601728) , the growth rate of China United Network Communications Limited(600050) new business is also significant. In 2021, its industrial Internet business revenue increased by 28.2% year-on-year to 54.8 billion yuan, accounting for 18.5% of the overall main business revenue. Among them, the cloud revenue of China Unicom was 16.3 billion yuan, a year-on-year increase of 46.3%.
