Business Review

In 2022, we furthered the full- fledged implementation of our strategy of building a world-class “Powerhouse” by maintaining an unwavering focus on customers. We progressed our scale-based and value-oriented business operations, driving the comprehensive and integrated development of our CHBN markets. We also consolidated our fundamental competencies, and advanced channel transformation and intelligent operations to enhance product competitiveness and service quality. We achieved favorable growth in our overall business, as well as increasing customer satisfaction. Our operating revenue amounted to RMB937.3 billion, of which revenue from telecommunications services accounted for RMB812.1 billion,representing an increase of 8.1% year-on-year.

Key Operating Data
2021 2022 Change %
Mobile Business
Customer Base (million) 957 975 1.9
Of which: 5G Package Customer Base (million) 387 614 58.7
Net Additional Customers (million) 14.97 18.11 21.0
Of which: Net Additional 5G Package Customers (million) 222 227 2.4
Average Minutes of Usage per User per Month (MOU) minutes/user/month) 264 256 –2.8
Average Handset Data Traffic per User per Month (DOU) (GB/user/month) 12.6 14.1 12.3
Average Revenue per User per Month (ARPU) (RMB/user/month) 48.8 49.0 0.4
Broadband Business
Wireline Broadband Customer Base (million) 240 272 13.4
Of which: Household Broadband Customer Base (million) 218 244 11.8
Wireline Broadband ARPU (RMB/user/month) 34.7 34.1 –1.7
Household Customer Blended ARPU (RMB/user/month) 39.8 42.1 5.8
Corporate Business
Corporate Customer Base (million) 18.83 23.20 23.2
IoT Card Customer Base (million) 806 1,062 31.8
“Customer” Market

Centered around 5G, we further converged our operations and built a platform economy model around users’ digital consumption needs. We accelerated the switch of 4G customers to 5G and uncovered sales opportunities arising from the convergence of the 2H2C and 2B2C markets. We optimized the tariff system and strengthened foothold in terminal sales, further promoting fixed and mobile network convergence; and further upgraded the operations of our three major customer brands – GoTone, M-zone and Easy Own. In addition, we entered the new track of digital economic growth, building the largest customer-facing digital life superstore, offering the most comprehensive products and the best experience, and fully integrating internal and external service touch points and high-quality resources to meet customers’ needs for a rich and convenient digital life. The rapid growth in customer scale, coupled with the integrated operations of “data access, applications and customer benefits”, helped us achieve rapid breakthroughs in the 5G business. As of the end of December 2022, our 5G network customer base reached 330 million, increasing to 33.6% of our entire customer base. The net addition of 120 million customers, or a monthly average net addition of more than 10 million customers, was an industry-leading growth rate. The ARPU and DOU of 5G network customers reached RMB81.5 and 24.7 gigabytes, respectively, leading to stable and healthy growth in overall mobile ARPU.

“Home” Market

We pursued the direction of “scale expansion, brand recognition, ecosystem building and value enhancement” in our development and continued to enhance our family information services system, driving the digital-intelligent transformation of the family lifestyle. Our initiatives included accelerating the upgrade of household broadband to gigabit and strengthening the integrated development of our smart home networks, home security, scenario- based broadband and other services with an aim to create more room for value growth. In view of the extension of content operations to all channels and content media to all kinds of screens, as well as the shift of film and television to also cover vertical-specific channels, we expanded our multi-terminal coverage to include devices such as TV, speakers and projectors to provide TV services across all platforms. With a focus on family users, we continuously enriched our smart home information services to include household intelligence, health and elderly care, home security, home education, home office and more. We also expanded our offerings to cover scenarios such as digital villages, smart communities and street-level stores, thus creating a stronger linkage between households and their surroundings. By expanding the broadband customer base, leading the upgrade of gigabit broadband consumption and actively expanding the applications of HDICT in new scenarios, our “Home” market achieved rapid growth in revenue and in customer value. As of the end of December 2022, the number of household broadband customers reached 244 million, with an average monthly new addition of 2.15 million customers; mobile HD customers reached 193 million, with a net addition of 25.11 million, reflecting a rising penetration rate. Home networks, big screen, security and other key smart home businesses saw a rapid uptick in scale, while health and elderly care, home education, household intelligence and other new HDICT scenarios achieved significant developments. Household broadband revenue grew by 9.4%, smart home value-added business revenue increased by 43.4% and household customer blended ARPU maintained favourable growth.

“Business” Market

For the “Business” market, we continued to grow in scale and customer value through our focus on key products and sectors, including by developing our government and corporate product and solution lists. We focused on enhancing the quality and quantity of our fundamental offerings, consistently improving the product capabilities of dedicated lines and the quality of our service delivery. We strengthened the synergistic development of Internet Data Center (IDC) and Content Distribution Network (CDN), consolidating the foundation with fundamental offerings for us to build on. We strove to build a leading cloud engine, cultivating industry-leading service capabilities across all scenarios that allow customers to seamlessly connect to the cloud when they access our network. We ensured that our core technologies are self-developed and are under our control, and that the variety of our product offering remains unsurpassed. We promoted the compatibility and openness of the industry ecosystem. Our influence in the mobile cloud industry increased significantly. We maintained our leading position in empowering all sectors with 5G by furthering our “5G+” plan and accelerating the build-out of our platform capabilities to support various sectors. This resulted in the scale development of 5G digitalization across verticals from an initial stage of isolated adoption. This helped us achieve a breakthrough in our 5G dedicated network revenue. In 2022, industry cloud leapfrogged, with revenue amounting to RMB41.2 billion, of which IaaS + PaaS revenue grew 122.2% year-on-year. As China’s first OpenStack Superuser, we launched more than 210 proprietary IaaS, PaaS and SaaS products, alongside more than 1,500 jointly developed SaaS products. Revenues of our IDC, ICT and dedicated lines reached RMB25.4 billion, RMB19.3 billion and RMB30.6 billion respectively, representing increases of 17.2%, 33.7% and 16.1% year-on-year. We had 1.06 billion IoT card customers, driving our IoT revenue to RMB15.4 billion, or growth of 35.5% year-on-year.

“New” Market

Thanks to our ongoing efforts to increase our level of globalization and scale up our business, our international business maintained favorable growth. We continued to strengthen key product capabilities in 5G industry solutions, IoT and other key offerings, continuously enhancing our end-to-end service quality and expanding our “circle of friends” in the international business. During the year, revenue from the international business increased by 25.4% year-on-year to RMB16.7 billion. In terms of equity investment, we generated synergy through a complementary approach to direct investment and investment through funds. Our direct investment focused on the key aspects such as network security, Industrial Internet and FinTech to create a bigger collaborative “circle of relatives” through which to expand our information services. As for investment through funds, we strove to manage this with a more professional and market-oriented approach, and on a larger scale. Anchoring our strategy around “Specialized, Refined, Differentiated and Innovative”, we helped foster the ecosystem and further unleash the potential of capital. In the area of digital content, we focused on “content + technology + integrated innovation”, strengthening content generation, aggregation and dissemination, and continuously building the industry’s leading content ecosystem. Alongside fast growth in active users of MIGU Video, cloud games and video connecting tones, revenue from the content business increased by 27.2% year- on-year during the year. MIGU Video’s monthly active customer base across all platforms recorded a year-on-year increase of 67.1% and the customer base of video connecting tones exceeded 340 million. In terms of FinTech, revenue from Internet finance increased 79.9% year-on-year, and monthly active customers of “and-Wallet” recorded a year-on-year increase of 59.0%. Digital RMB was used in a variety of scenarios as we built out our aggregation platform for payment capabilities.

Thanks to our forward-thinking and targeted approach to investment, we were able to lay out an ingenious new information infrastructure focusing on 5G, CFN and capability middle platform to ensure our all-round leadership in network coverage, quality, technology and customer experience, and to generate new momentum from our digital intelligence foundation, supporting growth across the CHBN markets. At the same time, we optimized our investment structure by strengthening investment control throughout the process, adopting specialized management and implementing measures to save energy and protect the environment. These measures have helped us ensure investment efficiency and promote low-carbon and high-quality development.

We continued to enhance the quality and capabilities of our infrastructure. As of the end of December 2022, the number of our base stations had exceeded 6 million, ranking first in the world. We have built the largest network cloud globally. The total length of our optical network reached 25.94 million cable kilometers while our dedicated network for governments and enterprises, and our backbone transmission network boasted bandwidth of over 74.7Tbps and over 809Tbps respectively. The bandwidth of CMNET, cloud dedicated network and IP dedicated network exceeded 473Tbps.

We continued to optimize our international information infrastructure. As of the end of December 2022, we had more than 80 submarine and land cable resources that enabled global coverage. Our total bandwidth for international transmission reached 123Tbps and our 230 POPs covered all major countries and regions worldwide. In addition, our international roaming and 5G services covered 264 and 60 locations respectively. Worldwide users covered by our Hand-in-Hand global partnership program exceeded 3 billion.

In 2022, our capital expenditures totaled approximately RMB185.2 billion. In 2023, we expect total capital expenditure to stand at approximately RMB183.2 billion, which will be spent primarily on areas including maintaining leading connection quality, optimizing computing force resources, building out and improving capabilities and supporting CHBN business development. Of this, capital expenditures for 5G network will amount to approximately RMB83.0 billion, which will be funded mainly from cash flow from operating activities.

Channel Transformation

We furthered online and offline integration and strengthened the three-dimensional channel operation to enhance the delivery capabilities of our channels and accelerate marketing transformation. The outcome has been clear. First, we upgraded the full-fledged direct sales system covering all terminals and channels in four phases: direct sales channels, terminal products, support systems and brand services. The enhanced operational efficiency of the direct sales alliance deeply integrated with our 5G, smart home, benefits and other businesses, driving the rapid development of the 5G terminal industry chain. Second, we expanded new channels to broaden marketing reach and integrate online touch points. By strengthening cooperation with leading Internet companies, we rapidly increased the proportion of online sales across our key businesses. We actively expanded cross- disciplinary cooperation on all channels by further cultivating an ecosystem around users’ life and work, thus extending our customer service touch points to a wide range of industries. Third, we deepened our base-level grid operation, establishing three lists (assessment, products and tasks), reducing the burden for frontline staff, and continuously improving the efficiency of our ‘inverted triangle’ support from managers to the frontline. As a result, the efficiency of grid operation and the satisfaction of frontline personnel continued to improve. Thanks to progress in channel transformation, our sales reach became more efficient in 2022. Alongside favorable revenue growth, selling expense as a proportion of revenue continued to decline.

Brand Operations

We stepped up our brand-building and operations efforts to foster outstanding brands. Reflecting our strategic positioning, we portrayed a high-end image of our corporate brand while communicating the premium proposition of our customer brands through customer operations, go-to-market activities, and ongoing proactive management. By doing so, we were able to conduct precise customer operation and retention activities, and increase customer value and loyalty. For our GoTone brand, we cultivated a sense of exclusivity. With the value rebate mechanism, we launched exclusive services targeting mid- to high-end customers to give them a stronger sense of gain. We strengthened brand campaigns around the themes of philanthropy and wellness, portraying the brand’s proposition of positivity that resonates with its customers. For M-zone, we focused on digital intelligence and trendiness to meet the interests of young customers. We carried out campaigns for users and gradually expanded them to reach new customers. We creatively launched virtual spokespeople for M-zone, planned out our first metaverse and cultivated social media channels to convey the brand’s culture and attract young followers. As for EasyOwn, we focused on the brand’s popularity. Leveraging the scale and stickiness of its customers, we further explored more customer segments including vertical classes and the silver economy. We launched customer upgrade programs and exclusive products for different customer segments. As a result, our customer scale and value continued to increase. In 2022, the customer base of the three major brands exceeded 258 million, with integrated brand recognition reaching 77.6%.

Customer Services

Putting customers at the heart of our business, we sped up the building of a service system covering every aspect and process of service and involving every member of staff. Our service capabilities and quality improved steadily, with customer satisfaction higher than the industry level. We put in place a service quality evaluation system based on customer perception, forming a three-level standard system mapping different elements from customer perceptions through to internal operations. We required all business lines to incorporate the service standards throughout their operations, resulting in quality improvements end-to-end, and across the board. We further implemented initiatives to protect customer rights and handle customer complaints, resulting in significant improvement in customer perception. We strengthened the Dayin platform to put in place a mechanism to collect feedback from customers and frontline staff to detect, communicate and resolve issues. With this in place, our efficiency in customer response and problem solving improved significantly. To strengthen premium content production, we launched the innovative “Heartwarming Service” brand campaign, which has further increased the recognition and reputation of our customer services. In 2022, customer satisfaction with our 5G network Internet services, household broadband Internet services and other services continued to rise, alongside an overall improvement in customer satisfaction across our CHBN businesses and a notable decline in customer complaints.

In 2023, we will further implement our strategy of building a world-class “Powerhouse” through confidently taking the initiative to drive high-quality and sustainable development. We will devote every effort to focus on four areas.

First, we will reinforce our information infrastructure to solidify our digital-intelligent foundation. Centering 5G, CFN and capability middle platform, we will optimize the planning, further convergence and centralization of this infrastructure, and enhance its functions. Building on our commanding leadership in connection, we will expand the usage of CFN across industries and scale up the application of the capability middle platform.

Second, we will enrich our integrated information product offerings to stimulate and generate market demand. Our products will be a major point of leverage for value operations. Therefore, we will accelerate the shift in product innovation from primarily focusing on connectivity to integrating connectivity, computing power and capability. With our quality product supply, we will satisfy, stimulate and create demand. We will improve product planning, strengthen the support system and establish innovative business models.

Third, we will target information services market segments to cultivate strong momentum for growth. With strong market acumen, we will promote value-oriented operations by leveraging our business scale and coordinate the comprehensive and integrated development of CHBN markets. We will create more consumption scenarios to cultivate new growth points. For the “Customer” market, we will consolidate our foundation, and for the “Home” market, we will focus on value mining. For the “Business” market, we will enhance quality and efficiency, while boosting the contribution from our “New” market.

Finally, we will remain dedicated to delivering quality services and enhancing soft power for our development. Putting customers at the heart of our business, we will win customer recognition with our services while building an outstanding brand image and reputation among our customers. We will strengthen quality control across the board, speed up marketing and services transformation, and further our brand-building and operating efforts.

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