Business Review

The Group has geared concerted efforts towards becoming a world-class enterprise by building a dynamic “Powerhouse”, which was an overarching mission central to its master plan for the year 2019. Specifically, it has made an all-out endeavour to foster scale-based and value-oriented operating practices and promote the holistic development of the CHBN “four growth engines” (the “customer”, “home”, “business” and “new” markets) in a converged, integrated and coordinated manner. A special focus has also been placed on business transformation, innovation and smart operations, in addition to the building up of core capabilities such as network, IT, research and development and customer services. Following these efforts, the Group has obtained positive momentum in operating performance and maintained market leadership, laying a strong foundation for sustainable growth in future.

Key Operating Data
2018 2019 Change %
Mobile Business  
Customer Base (million) 925 950 2.7
Of Which: 4G Customer Base (million) 713 758 6.4
Net Additional Customers (million) 38 25 –33.4
Of Which: Net Additional 4G Customers (million) 63 45 –28.2
Average Minutes of Usage per User per Month (MOU)
320 287 –10.4
Average Handset Data Traffic per User per Month (DOU)
3.6 6.7 85.5
Average Handset Data Traffic per 4G User per Month (DOU)
4.3 7.7 78.6
Average Revenue per User per Month (ARPU)
53.1 49.1 –7.5
Broadband Business  
Wireline Broadband Customer Base (million) 157 187 19.4
Of Which: Household Broadband Customer Base (million) 147 172 17.1
Wireline Broadband ARPU
33.5 32.8 –2.0
Household Broadband Blended ARPU
34.4 35.3 2.7
Internet of Things ("IoT") Business  
IoT Customer Base (million) 551 884 60.3

The Group continued to comfortably maintain market leadership in 2019. Telecommunications services revenue has successfully reversed its unfavourable downward trajectory recorded in the first half of 2019 and managed to deliver positive growth for full-year 2019. The Group has achieved a further enhancement to its revenue structure, where the respective proportions of revenues from “home”, “business” and “new” markets to total revenue have continuously increased. New drivers such as DICT and international business have also demonstrated sound growth momentum. 4G customer base has recorded a net addition of 45.36 million to reach 758 million. Amongst them, the number of VoLTE customers stood at 521 million. Handset DOU increased by 85.5% year-on-year to 6.7GB. The Group’s broadband business has also reported robust growth, with the number of household broadband customers increasing by 17.1% to reach 172 million. The Group’s “business” market has played a key role in fostering the Group’s overall revenue growth, with its corporate customer base reaching 10.28 million subsequent to a net addition of 3.1 million. In the meantime, the number of IoT customers has registered a net addition of 333 million to reach 884 million.

The “Customer” Market

The Group has taken a multi-pronged approach to cope with increasing competition arising from the homogeneous nature of industry operators. It has placed a special emphasis on customers and adopted the three strategies of convergence, integration and digitisation, making a concerted effort to devise a holistic operations model by combining “data access + applications + customer benefits”. It has also shifted its focus from increasing customer and data traffic market shares to nurturing loyalty of existing customers and enhancing the value of full life cycle. In 2019, full business bundling rate has increased by 33 percentage points and customer satisfaction rate has gone up from that of last year. In addition, the Group has upgraded the three popular brands of “GoTone”, “M-zone” and “Easy Own”, rejuvenating them by providing new customer benefits, content and services, amongst others. All these efforts have resulted in a stronger sense of gain amongst customers, and the retention rate of mid – to high-end customers has been on a rise. Since the official announcement of the commercial launch of 5G packages, the Group has recorded an industry-leading number of 15.4 million 5G package customers as of the end of February 2020. The Group has also proactively promoted the popularisation of 5G devices, taking a number of promising sales and marketing measures to attract early users.

The “Home” Market

The Group remained committed to achieving “scale expansion, brand building, ecology cultivation and value uplift” for the “home” market. To achieve these goals, it has redoubled efforts to promote integrated development and consistently explored ways to add value to this business line. It has also stepped up measures to strengthen customer experience and continued to enhance broadband quality, creating a brand image of premium quality. This business line continued to demonstrate robust growth momentum, with household broadband customer base recording a net addition of 25.09 million to reach 172 million. Amongst them, the proportion of customers subscribing to products with bandwidth of 100Mbps or above has increased by 21.1 percentage points year-on-year to reach 88.1%. Driving further reforms on smart home business, the Group has stepped up additional efforts on TV content development and continuously enhanced products such as “smart home network deployment”, “Mobaihe” (a set-top box that provides high-definition video-on-demand service), “and-Mu” (a family surveillance camera). These initiatives, coupled with the Group’s endeavours to promote the bundle sales of “smart home network deployment” and home hardware and the complete opening-up of the corresponding service capabilities, have resulted in a significant boost to network access value. Household broadband blended ARPU has risen by 2.7% year-on-year to reach RMB35.3.

The “Business” Market

As the new driver of the Group’s revenue growth and business transformation and upgrade, the “business” market has stepped up a number of measures to strengthen basic capacities and promote innovative business practices. The Group has worked further on the integrated development of “network+ cloud+ DICT” for this business line, leading to a further enhancement to market competitiveness and contribution to the Group’s total revenue. DICT revenue has registered a year-on-year increase of 48.3% to RMB26.1 billion. Of which, mobile cloud revenue has propelled a year-on- year increase of 59.3% to RMB2 billion. Revenues from IDC and ICT have also recorded respective year-on-year increases of 46.8% and 163.5%. Taking full advantage of 5G, the Group has swiftly set up demonstrative showcases of 5G application scenarios for the vertical market, aiming at a number of industry sectors. As of the end of 2019, it has implemented 50 Group-level applications. The Group will continue to join hands with industry partners, cultivating accommodative industry ecology inclusive of the vertical market and building three types of resource pools which gather resources from industry partners providing devices, applications and integrated services.

The “New” Market

The Group has scaled up efforts to develop the international market and to seek more investment cooperation opportunities. It has proactively promoted a number of businesses including video aggregation on the MIGU platform, ultra-high definition VR, video connecting tones, cloud-based games, satisfying the demands from 2C and 2H markets. The Group has also worked further on integrating its core businesses with financial services, building new, holistic business ecology. As for international expansion, the Group has maintained market leadership in LTE roaming coverage and established three international business brands of CMLink, iConnect and iSolutions. The “Hand-in-hand” program has registered more than 2,900 million users on a global scale. With respect to digital content and Internet finance, the number of “video connecting tone” users has recorded a year-on-year increase of 442% and that of “cloud-based game” users has exceeded 17.57 million. At the same time, the number of monthly active users of the core functions of “and-Wallet” has increased by 58.9%, and the number of merchants has increased by 49.5%.

Making every endeavour to promote high-quality development, the Group has taken the lead amongst its peers to achieve service and value upgrades. In 2019, the Group continued to show unwavering devotion to providing exceptional customer services and place a relentless focus on its valued customers, further increasing customer satisfaction and loyalty.

The Group has persistently taken measures to enhance customer perception. Last year, by carefully looking into major customer concerns, the Group has thoroughly analysed the root causes of complaints and examined key factors that undermined customer satisfaction and network quality. It has also scaled up efforts to improve the quality of mobile networks, home broadband, corporate dedicated lines and service platforms and launched thematic campaigns to protect customer interests. As a result, overall customer satisfaction has improved. As to the mobile market, handset data tariff has dropped by 47.2% year-on-year. The Group has fully implemented “Mobile Number Portability” as scheduled and has maintained a stable customer base overall. As to the broadband business, the Group has ensured the quality of broadband installation and maintenance services by introducing a service workflow that streamlines and shortens the handling time of these services, in addition to other initiatives that foster service transparency and facilitate whole-process management and control. Thanks to these efforts, the Group has achieved an industry-leading customer satisfaction rate in terms of household broadband installation and maintenance services. As to the corporate business, the Group has redoubled efforts to enhance end-to-end service support, fostering a responsive and centralised service delivery system that pools and coordinates resources from the entire network. Handling time for service inception has significantly shortened and the number of complaints has continued to go down.

The Group has stepped up efforts to persistently enhance products and services. Tariff plans presently on-shelf has been largely simplified and rules were made less complicated. The Group has put a focus on customer value and experience, and incorporated new service features into its business model by considering new elements from its new 5G network service capabilities and benefits provided by external partners. On top of these were the Group’s initiatives on launching the 5G personal packages and family packages and implementing the “GoTone Through-Train” plan. It has also comprehensively driven the upgrade of the three major brands. In an effort to achieve a brand image with “exceptional taste, quality and character”, it continued to enhance benefits for GoTone customers, formulated and implemented product communication strategies for M-zone, and launched a new suite of services for Easy Own regular customers. The Group has also scaled up efforts to promote channel transformation, where more traditional services are available from smart-based channels and the Internet. Overall, the proportion of transactions handled by online channels has gone up to 58.8% year-on-year. By introducing new forms of cooperation, the Group was able to obtain more than 1 million omni-channel retailers. The Group has also proactively explored grid operations, where each grid forms a separate base-layer business unit fulfilling general sales duties to better satisfy customer needs and make timely responses, thus injecting vigour into the company at the base level.

5G has reached a new stage of development and set new trends. The Group has kept abreast of the times, making every correct move to firmly build up capabilities for key areas and making good preparation for sustainable growth.

The Group has been constantly raising the bar for network capabilities. As of the end of 2019, it has built a total of 4.48 million base stations for its mobile networks, of which, 3.09 million were 4G base stations. The Group has also obtained an industry- leading 4G Customer Net Promoter Score and 4G network satisfaction. In respect of 5G, the Group has proactively driven 5G network development, building more than 50,000 5G base stations and providing 5G commerical services in 50 cities. In these cities, the Group has completed upgrades and transformation on NSA in areas where both 4G and 5G networks were simultaneously covered. By doing so, the Group was able to meet network capacity needs during the initial phase of 5G commericalisation. It has also promoted the maturity of SA products and industry development, and completed transformation of the 5G SA core network for pre-commercialisation in Nanjing. In addition, the Group has continued to strengthen broadband coverage and quality. It has laid down a set of principles that give priority to nurturing platform capabilities and deploy ports based on market demands. Accordingly, the Group has made suitable advance planning on building up Gigabit network capabilities and aligned its construction efforts with market development. Besides, the Group has scaled up efforts to expedite the construction of dedicated cloud-based networks and by leveraging cloud-network synergy, it has managed to enhance business competitiveness. The Group has also devised a new three-pronged strategy that puts a special focus on achieving global acessibility, global network construction and global deployment. Following this strategy, the Group has boosted its ongoing work to build up basic network resources on a global scale, including laying international submarine cables, cross-border terrestrial cables and PoPs (points of present) especially in areas covered by the “Belt and Road Initiative”.

The Group continued to bolster its own abilities and build up a remarkable pool of proprietary resources. Besides its an ongoing effort to promote the maturity of the 5G standard, the Group has established a mechanism for the commercial use of end-to-end technologies and, following which, these technologies are able to speak in sync with their international counterparts and meet case implementation requirements. These initiatives helped the Group deliver a well-developed suite of 5G technologies. The Group has also scaled up research efforts on the technical aspects of 5G security, taking initiatives to complete China’s first 5G security standards for the industry and formulating 5G security standards for corporates. In addition, the Group continued to enhance core competences with a special focus on the requirements of cloud, launching the Big Cloud 5.0 Product Series. The Group has also launched the Pioneer 300 Plan and formulated strategies for edge computing technology. Amongst its peers, the Group was the first operator to launch a proprietary cloud platform using edge technology. This compact platform is easy to operate and maintain and has already entered the trial stage. Further, the Group has continously enriched value-added offerings under the IoT OneNET platform, supporting implementation of various industry projects. The Group has also centralized its AI (Artificial Intelligence) development platform, making it online and available to all units within the Group. It has also incubated a number of AI applications including smart networks, smart audits, smart editing, industry quality control and smart film diagnoses.

Entering a crucial phase of business transformation and 5G network construction, the Group will focus on laying a solid foundation for the integrated development of the CHBN “four growth engines” and asserting ongoing 5G market leadership over the next course of development. It will also step up efforts to exercise strong investment discipline and achieve a refined investment structure, deploying resources to meet the demands arising from evolving market competition in the most rational manner and enhancing investment efficiency.

To provide strong support for business growth, the Group has incurred an actual capital expenditure of RMB165.9 billion for 2019. Capital expenditure to service revenue ratio has fallen by 0.3 percentage points from that of last year, demonstrating enhanced investment efficiency. Capital expenditure was spent mainly on, amongst other areas, strengthening 5G first-mover advantage, supporting 4G data traffic growth, bettering the deployment of cloud resources, promoting cloud- based network transformation, building up transmission capability and boosting IT support.

The Group plans to spend total capital expenditure of RMB179.8 billion for 2020. Capital expenditure will serve for a variety of purposes which primarily include the proactive build-out of the 5G network, the construction of cloud-based infrastructure, support for the all-rounded development of the “four growth engines” and enhancements to smart operations. The capital requirements under this capital expenditure plan will be primarily sourced from the cash generated from the Group’s operating activities. With a view to satisfying business transformation needs and striving to continuously lift resource utilisation efficiency, the Group will continue to make scientific and rational allocation and deployment of resources and make targeted investments and construction considering the needs arising from use cases.

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