With the annual financial report of 2021 released recently, the capital expenditure plan regarded as the investment vane of the three major communication operators was also announced in the same period. Under the background that the collective said it would increase the total expenditure in 2022, the change in the proportion of 5g network investment has attracted the attention of the whole industry chain.
According to the public plan, China Telecom Corporation Limited(601728) it is estimated that the capital expenditure in 2022 will be 93 billion yuan, of which 5g network investment accounts for 36.6%, and the specific amount is 34 billion yuan, a year-on-year decrease of about 10.5%; China Mobile estimates that the capital expenditure related to 5g will be about 110 billion yuan in 2022, a year-on-year decrease of 3.5% China United Network Communications Limited(600050) although no specific figures have been released, in view of the implementation of the policy of co construction and sharing with China Telecom Corporation Limited(601728) the industry expects that its 5g related investment is also likely to show a downward trend.
"From 2023, if there are no other major events, 5g capital expenditure will show a gradual downward trend." Yang Jie, chairman of China Mobile, made it clear at the recent earnings briefing that the three years from 2020 to 2022 will be the peak of 5g investment, and 2022 will be the last year of the company's 5g investment peak. It is expected that after three years, the proportion of 5g capital expenditure in revenue will be reduced to less than 20%.
In this regard, Yang Guang, senior strategic analyst of wireless operators at strategy analytics, told the reporter of China Business Daily that from the previous 4G construction experience, the decline in the proportion of 5g investment is in line with the law. "At present, 5g network construction has entered a stable stage, and the cost of 5g construction per unit scale is bound to decline." Yang Guang pointed out.
Why
Since it was officially put into commercial use on June 6, 2019, 5g network construction investment has always been the main field to drive the upstream and downstream capital vitality of China's communication industry. According to the "statistical bulletin of communication industry in 2021" issued by the Ministry of industry and information technology, China completed a total of 405.8 billion yuan of fixed assets investment in telecommunications in 2021, of which 5g investment reached 184.9 billion yuan, accounting for 45.6% of the total investment and 8.9% higher than that in 2020.
Huge investment will also boost China to become the world's leading 5g country. By the end of 2021, China has built and opened 1.425 million 5g base stations, accounting for more than 60% of the world. 5g mobile phone users have reached 355 million. 5g network has covered all prefecture level urban areas, more than 98% of county urban areas and 80% of township and town areas in China.
It is worth noting that a number of operators told reporters that in the initial construction of 5g in the past two years, the cost investment of network infrastructure such as base stations and related network equipment has always occupied the bulk, even equivalent to all expenses. However, according to the target released by the Ministry of industry and information technology in February this year, China plans to build more than 6 Shenzhen Fountain Corporation(000005) g base stations in 2022, which is basically the same as the number of 650000 base stations in 2021. How can operators significantly reduce construction expenses when the number of stations is roughly the same?
In this regard, a number of industry insiders told reporters that there are two main reasons: on the one hand, the price of each generation of communication equipment will show a marginal decreasing effect. On the other hand, the construction stage of 5g base station has entered a mature stage, and optimizing network coverage and 700MHz construction will become the main theme.
"After large-scale production, the price of large-scale communication equipment such as base stations will naturally decline, which is the law of the market." Fu Liang, a telecom analyst, told reporters that the unit price of base stations newly purchased by operators will be lowered to a certain extent every year. When the number of base stations is basically the same, the expenses of operators will naturally be reduced.
At the same time, after the 5g network coverage of major urban areas and towns in China has been basically realized, the 5g network construction of operators in various places has entered the stage of improvement and optimization Li Zhengmao, general manager of China Telecom Corporation Limited(601728) said at the recent financial report announcement that China Telecom Corporation Limited(601728) 5g construction is expected to be mainly used to improve network coverage and capacity expansion in the next 1-2 years. Zhou Guijun, chief editor of c114 communication network, pointed out to reporters that this also means that the core architecture of the main network has been basically completed, and the decline of 5g cost is also a natural result.
In addition, Zhou Guijun said that the single acquisition price of 700MHz and other base stations is cheaper than that of traditional 2.6GHz and other large macro base stations, with lower power consumption and maintenance costs. Therefore, it is normal for operators to reduce the expected cost. According to public data, China Mobile plans to build another 28 Shenzhen Sdg Information Co.Ltd(000070) 0MHz base stations in 2022, an increase of 80000 compared with 2021.
Therefore, Yang Guang believes that the overall reduction of 5g investment of the three major operators is a natural adjustment to comply with the development law of the communication industry, but this does not mean that the operators will significantly slow down the promotion speed of 5g. According to the announcement and instruction of the Ministry of industry and information technology, 2022 is still an important year for the large-scale development of 5g, and the vigorous development of 5g applications and services will be the main direction of 5g industry in the future.
digitization is a must
While the proportion of 5g investment decreases, operators seem to have a new strategic focus. According to the operator's plan, operators will increase investment in industrial digitization represented by computing network and cloud.
According to the public plan, China Telecom Corporation Limited(601728) will strengthen the investment in industrial digitization in 2022, which is expected to be 27.9 billion yuan, with a year-on-year increase of 62% China Telecom Corporation Limited(601728) chairman Ke Ruiwen said that for the next three years, China Telecom Corporation Limited(601728) strive to realize that the digital revenue of the industry accounts for more than 30%; Meanwhile, China Mobile will invest 48 billion yuan in the computing power network carrying the business development related to its digital transformation, and implement the national project deployment of "counting from the east to the west". In addition, China United Network Communications Limited(600050) also announced that it would moderately increase the network investment of "digital computing in the East and digital computing in the west" and build the core competitiveness of innovative products in advance under the guidance of the action plan for the construction of new digital information infrastructure.
"The collective strategic shift of the three operators also shows that digitization has become the focus that operators must strengthen." Yang Guang told reporters that after the basic completion of 5g network infrastructure, the development of applications and services on its base is the core competitiveness of 5g business. Therefore, digital application services such as cloud computing and data center will inevitably be new options for operators.
The reporter checked the latest annual reports of the three major operators and found that in 2021, China Mobile's digital transformation business represented by smart home, government enterprise dict, Internet of things, private network and emerging market business contributed 41.5% to the overall revenue growth China Telecom Corporation Limited(601728) industry digital business income reached 98.9 billion yuan, a year-on-year increase of 19.4% China United Network Communications Limited(600050) has a growth rate of nearly 26.9% in data and other Internet applications, and its contribution to the overall revenue is as high as 53.8%.
It is worth noting that in the field of public cloud, the performance of China Mobile cloud and China Telecom Corporation Limited(601728) Tianyi cloud is particularly outstanding. Among them, the revenue of Tianyi cloud doubled to 27.9 billion yuan, a year-on-year increase of 102%; Mobile cloud revenue reached 24.2 billion yuan, a year-on-year increase of 114%.
In this regard, Fu Liang told reporters that the choice of digital routes by the three major operators is not only the current policy response to the national strategy of "counting from the east to the west", but also the business needs, especially the growth of cloud business.
"From the financial report, the current growth of consumer business is limited, and it is natural to switch to government and enterprise business with large growth space." Fu Liang said.
Zhou Guijun believes that from the current competitive situation of China's public cloud market, the Matthew effect is very obvious, and manufacturers with small scale and small share basically have no living space. Therefore, for operators who want to do something in the cloud market, expanding scale and enhancing competitiveness is a necessary work, which also has the result of increasing investment in expanding data centers and cloud servers.
The reporter noted that China Telecom Corporation Limited(601728) has announced that it is expected to invest 6.5 billion yuan in IDC in 2022, with a target of 45000 new racks, 14 billion yuan in computing power and 160000 cloud servers. China Mobile will put into operation about 450000 available IDC racks, accelerate the layout of hot center cloud, build edge cloud on demand, and put into operation more than 660000 cloud servers.
operator background unchanged
5g investment decreased and digital investment increased. It is expected that getting rid of the pipeline role of traditional network operators will be the main trend of operators in the next five years. In this regard, a number of industry insiders expressed different opinions.
"Unlike most operators in the world, Chinese operators have more ability to allocate resources." Yang Guang told reporters that this can also explain why China's three major operators can have more advantages in government and enterprise fields such as public cloud. Therefore, for operators, the role of infrastructure construction is still in one continuous line, which is also the foundation for the development of operators.
Fu Liang said that the market should not be ignored. The essence has not changed from 5g network construction to cloud network and digital network construction. "Traditionally, the network refers more to the communication network, but at present, the concept of basic network resources has been extended. Cloud network and computing network will also be an important part of the network in the future." Fu Liang said that from this perspective, operators still play the role of basic network builders.
Zhou Guijun believes that the investment shift of operators, although there is a regional migration, is not divorced from the infrastructure level in essence, that is, from the construction of 5g network to the deployment of cloud resource pool and Computing Center, which is still dominated by hardware and "base".
In this context, the three analysts pointed out to reporters that judging whether operators will have more role transformation in the future should still be based on how much innovation and competitiveness they have at the application and service level, which is also the traditional weakness of operators.
It is worth noting that operators have tried in this direction. Taking Tianyi cloud as an example, China Telecom Corporation Limited(601728) recently announced that it is exploring the possibility of splitting it into a public offering. Yang Guang said that of course, there is the need for operator financing, but we should see more that the changes brought by the market-oriented mechanism innovation brought by listing to operators, including having a more competitive talent team and business innovation ability, are beyond the reach of traditional operators.
"In short, it is too early to talk about operators fading out of 5g business." Fu Liang reminded that the potential of 5g has not been brought into play. At the moment when operators vigorously seek innovation, various transformation exploration is still based on the main line of 5g development.
