Wednesday, April 5, 2017

China Telco Data for Feb 2017 and Market Update - Part 1

China subscription data by operator for February 2017

The following data for mobile customers was reported on March 20th for the previous month of February (millions of subscribers):

                                                Total subs.;     added Feb;      4G subs.;         added Feb

China Mobile:                        853.698;             2.519;              558.603;               6.395

China Unicom:                       265.624;            0.536;              116.113;                 5.58
China Telecom:                      218.520;             1.750;              131.710;               4.980
Total:                                    1,337.842;             4.805;              806.426;             16.959


China Mobile's share of total mobile subscriptions in China at the end of February was 63.81%, but its share of new Chinese mobile subscribers added in February was only 52.42%, so its overall mobile share dropped in February though, bearing in mind additions were only 0.36% of the January 2017 base, not by very much.
China Mobile's share of total 4G subscriptions at the end of February of 69.27% was 5.46 points higher than its share of total mobile subscriptions, but its share of net 4G additions during the month was only 37.71%, and given net 4G adds in February were 2.15% of the January 2017 4G subscription base, that did have a meaningful impact, reducing Mobile's 4G share of 69.94% at the end of January by 0.67 points.

If that rate of share attrition continued through 2017 then China Mobile's 4G share would end up at about the same share that it has of total subscriptions.

Fixed broadband subscribers for February (millions):

                                                Total subs;      added Fe.;       Total 2016;     Feb vs trend.

China Mobile:             83.270;                        2.691;              22.595;            Above average

China Unicom:           76.232;                        0.860;              2.906;              Above average

China Telecom:          124.850;                      0.820;              10.590;             Average

Total:                          284.352;                      4.371;              36.091;             Above average

(NB: it appears China Unicom may have made an adjustment to its historical numbers, or OND made a small error, but the above numbers are up to date.)

Recent major announcements related to the Chinese market or players

Huawei acquires 16.83% share in Indonesia's seventh largest mobile operator

On March 14thHuawei announced that, as part of a debt restructuring operation by publicly-quoted Indonesian CDMA technology-based fixed wireless operator Bakrie Telecom, a subsidiary of Indonesia's Bakrie conglomerate currently valued at IDR 1.84 trillion ($138 million) and serving 12 million customers, Huawei had taken a 16.83% market share of the company. This is the country's seventh largest mobile operator with a market share of around 3.5% of the 350 million Indonesian wireless subscriptions market.

(NB: rather than implying diversification by Huawei, it seems more likely that its $23 million local investment is purely tactical.)

Oppo to open new RMB 2bn R&D centre in Dongguan

On March 16th Digitimes Research noted a Chinese-language Southern (Nanfang) Daily report that China-based smartphone vendor Oppo (the world's fourth largest smartphone vendor by units and hot on the tail of No. 3 Huawei) was expected to begin construction of a new R&D centre, costing RMB 2 billion ($289.29 million), in Changan Town, Dongguan, Guangdong province at the end of 2017. The facility will include a testing centre, software development centre and a mobile network R&D centre, and is due to be ready in 2019. 

(NB: Oppo has recently been growing significantly faster globally than Huawei and notably in Q4 2016, in an Indian market of 25.8 million smartphone units, according to IDC took fourth place with an 8.6% market share, behind Samsung (25.1%), Xiaomi (10.7%) and  Lenovo (9.9%), but well ahead of Huawei.)

Vivo to open RMB 2bn production unit in Changan 

According to the same source as above, the fifth largest smartphone company by units shipped, Vivo, which is chasing Oppo as Oppo is chasing Huawei, plans to spend RMB 2bn, also in Changan City, on a new production base with annual production capacity of 90 million handsets, also due to be ready for commercial production in 2019 (in India in Q4, Vivo had a 7.6% market share, close behind Oppo and well ahead of Huawei).

IBM with cloud partnership in China with 21 ViaNet signs new cloud deal with Wanda 

On March 21st IBM, which according to the company's CEO, Virginia Rometty, gets 22% of its annual sales from Asia Pacific, including China, and already has a cloud partnership with Chinese data centre specialist 21 ViaNet, signed an agreement to form a joint Chinese cloud development company (Wanda Cloud Company) with the recently created Wanda Internet Technology Group, a subsidiary of China's Wanda Group. Wanda is a RMB 255 billion sales level Chinese and increasingly international conglomerate, founded by Chinese billionaire Wang Jianlin that specialises in property development, luxury hotels, cinemas, and is well known domestically for its local landmark Wanda Plazas mixed retail and residential developments in over 100 Chinese cities.

This is a somewhat experimental pairing given that the Wanda Group's primary current focus is on international expansion in property development and cultural activities such as film-making, cinemas and sports sponsorship. According to Wanda's website, by 2020 it aims to become a world-class multinational corporation with assets of $200 billion, market capitalisation of $200 billion, revenue of $100 billion and net profits of $10 billion. Wanda's Internet subsidiary was created in October 2016 by spinning out several businesses from Wanda's finance group, which operates payment services and data centres. The new operation has a stated ambition to become an IoT player. The new company will be competing with the cloud activities of China's existing Internet giants Alibaba, TenCent and Baidu, and other cloud players including partnerships with Amazon and Microsoft. The advantage to IBM is perhaps that it will be initially at least the dominant partner in the new company. There has not been much news about IBM's arrangement with 21 Vianet, (announced in 2012 and extended for a further three years in October 2015), which operates in 30 Chinese cities, but possibly is not as aggressive or ambitious for expansion as IBM might wish. 21 Vianet also has an agreement with Microsoft which may not suit IBM.