Broken communication imbalances | build for victory, decisive battle market wisdom

Cui Liangliang: The pattern of “one dominant player” in China’s telecom operators has lasted for more than a decade, spanning the 2G, 3G, 4G and 5G eras. Xujun Tao, head of digital capabilities at Nomura Integrated Research, thinks it will be hard to reverse that quickly in the next few years. In terms of overall financial performance, China Mobile still has no pressure on profits or cash, thanks to its far superior mobile subscriber base. That leaves China Mobile with plenty of room to compete.

This advantage is also reflected in the optimization of 5G networks. The Chinese mobile user base makes network optimization more economies of scale. With fatter margins to back it up, it is also more comfortable with the costs of operating 5G networks.

However, Tao Xujun thinks, look on the whole, the gap of three operators is very difficult to pull larger. Under the competition of 5G homogeneity, users actually feel little difference between brands and so-called network experience. 5G is unlikely to reverse or widen the revenue gap in the mobile business.

Home broadband is the next possible new winner, but it is also in a state of indifference. The core competence of the operator is in the network, and the deployment of smart home relies heavily on the product attractiveness of the partner, rather than the product of the operator. Although China Mobile is pushing home broadband and seeing results, the boost to revenue and profits is far from the magnitude of the mobile business.

Promoting competition will inevitably affect the profitability of the three major operators. So the current policy is mainly to prevent vicious competition, prevent the leader with the absolute leading volume of capital cost crushing. However, it is still widely believed that the communication operation industry is entering internal volume competition, rather than insufficient competition. Because the market is saturated, it is difficult to find new blue ocean.

Opening up virtual operator to enter is a beneficial attempt to increase the vigor of market competition. But virtual operators entered the wireless market later, and the market was basically saturated. Volume and traffic wholesale price and retail price gap is small, in the same lack of killer applications and differentiated services on the basis of small profit or no profit becomes inevitable. In the environment of increasingly tight protection of personal information security, marketing advertising subsidies and other communication modes are impossible to carry out. In general, though, the introduction of enough private firms into the market is still the only way to promote a healthy competitive environment.

In fact, the most promising areas for 5G are industrial applications, but the industry is likely to be dominated by specialist solution providers rather than operators. But such cross-border competition will also spur operators to cross over.

From the point of view of pursuers, this dynamic enables Unicom and Telecom to stimulate the vitality in the government and enterprise field, which is difficult to stimulate in the operators. Because compared with traditional business, this innovative business has a high threshold but small scale, and presents a long tail shape, which is actually composed of many small markets. But at the same time, this kind of long tail market form, is also the weak operator to accumulate small wins for big wins, gradually catch up with the reality of the road. In this kind of market, user base and financial advantage can not play a big role, fine operation and professional ability are more advantageous.

Smart home, smart industry, smart city, and all smart markets will be the next battle ground. It was a series of small battles here and there. There are a series of small-scale operators, able to flexibly face the small battlefield, focus on small areas. In this case, how to rely on the big resources of the enterprise and give play to the advantages of the operator itself requires further research on the system of separation of basic business and innovative business.