Where is the value-added space for China Mobile?
Data from the Ministry of Industry and Information Technology shows that in August 2024, China's mobile phone users totaled 1.778 billion, far exceeding the country's total population, leaving limited room for further growth.
$CHINA MOBILE(00941.HK)'s latest data shows that as of September 30, 2024, its total mobile service subscribers reached 1.004 billion, with a net increase of 12.98 million this year, accounting for 56.47% of China's total mobile phone users.
In comparison, $CHINA TELECOM(00728.HK) had approximately 443 million mobile users by the end of September, with a net increase of 14.9 million this year, higher than China Mobile's growth. This suggests that China Mobile's ceiling for individual user growth may be approaching.
Some may question whether China Mobile, which has long relied on individual users, will hit a growth bottleneck. Not necessarily!
Non-individual Business Share is Expanding
China Mobile had 539 million 5G network users by the end of September, accounting for 53.73% of its total mobile users, while $CHINA TELECOM(601728.SH) had 345 million 5G package users, equivalent to 77.95% of its mobile users.
Notably, since May this year, China Mobile changed its reporting method for 5G users from "5G package users" to "5G network customers," reflecting the number of mobile customers who used the 5G network in that month, to better represent its 5G development.
Caijing noticed that before the change in statistical method in May, China Mobile's 5G package users were very high, close to 800 million, implying a penetration rate of over 80%. However, the later data based on actual 5G network usage was much lower, suggesting that while 5G package adoption was high, actual 5G network usage remained relatively limited.
Comparing year-on-year data, Caijing observed that China Mobile's 5G network users grew by 26.82% in the first three quarters of this year.
In terms of wired broadband users, China Mobile had 314 million users by the end of September, with a net increase of 15.36 million this year. In contrast, China Telecom had 196 million wired broadband users, with a net increase of 6.1 million.
This shows that China Mobile has become more pragmatic in its individual business, while maintaining a leading position in household and enterprise user growth.
The difference between individual and household users suggests that China Mobile's focus is increasingly shifting toward higher-value-added segments like household, enterprise, and emerging markets.
As shown in the chart below, over the three years since its A-share listing, China Mobile's individual market revenue has remained largely flat, with growth mainly driven by household, enterprise, and emerging markets. The share of individual market revenue dropped from 60.05% in H1 2022 to 55.04%.
Before the rise of social media platforms, China Mobile's individual business was its most glorious advantage. However, with the emergence of platforms like $TENCENT(00700.HK) , mobile services face increasing competition. Shifting focus from individual to non-individual business is a wise choice.
Mobile operators can turn platforms like Tencent and $BABA-W(09988.HK) from competitors into major clients that drive business growth, benefiting from China's rapid internet development.
Admittedly, current performance data shows that individual business has a higher ARPU (average revenue per user). China Mobile's mobile ARPU for the first three quarters of this year was RMB 49.5, lower than RMB 51 in H1 2024 and RMB 51.2 YoY. The household ARPU was RMB 43.2, slightly higher than RMB 42.1 YoY but still below individual ARPU.
However, non-individual business has greater potential for value chain expansion.
Take household business as an example. Although ARPU is lower than individual users, household users can expand revenue sources through IoT, content conversion, smart communities, and AI smart homes, creating higher value and profit conversion for China Mobile.
The same applies to enterprise business, with vast expansion opportunities in cloud services, 5G commercial applications, connected vehicles, and digital government.
For example, through partnerships with smart car manufacturers, operators can generate diversified revenue from automakers or car users, including network usage, multimedia, and positioning services.
Additionally, China Mobile can reallocate resources from fragmented individual business to invest in emerging industries like AI, expanding into low-altitude economy and aviation internet, creating social value while exploring new growth areas.
More importantly, developing new productive forces relies on infrastructure investments by operators. China Mobile returning to its "connectivity" role is appropriate, especially in the upcoming AI era, where mobile operators will play a key role in building "intelligent computing" capabilities.
In terms of capital investment, China Mobile's capex this year may decrease slightly to RMB 173 billion from RMB 180.3 billion last year. Caijing noted that connectivity (especially 5G networks) remains a key focus, but investment in computing power and foundational capabilities is increasing.
It is foreseeable that in the near future, the share of individual business in China Mobile's revenue will continue to shrink, while contributions from household, enterprise, and emerging markets will expand. While this may impact short-term individual business revenue and profits, it will benefit China Mobile's long-term sustainable development.
Given its stable fundamentals and key role in China's AI investment and development, China Mobile has been selected for the "HK Top 100" list for multiple years.
The 2024 Hong Kong Listed Companies Development Summit and the 11th "HK Top 100" Awards Ceremony, hosted by the HK Top 100 Research Center and co-organized by Caijing and Futu, will be held on the afternoon of November 11, 2024, at the Hong Kong Convention and Exhibition Centre. The event will explore ways to strengthen Hong Kong's position as a global wealth management hub and capital market fundraising center, as well as enrich its fintech ecosystem in the new era.
With its outstanding performance this year, China Mobile is expected to be included in the latest "HK Top 100" list. Stay tuned.
By: Mao Ting
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