Telecom operators worldwide are grappling with the challenges of transformation amid the slow growth and lack of a killer app for 5G.
As a result, reducing dependence on traditional telecom revenue has become crucial, prompting companies to diversify into streaming, cloud, and AI applications. Despite China's impressive 5G penetration rate of over 50% and its status as the world's largest consumer market, Chinese telecom operators have made a clear shift at the Mobile World Congress (MWC).
The 2024 MWC in Shanghai commenced on June 26. In the opening keynote, China Telecom announced its successful transformation into a tech and security-oriented company, leveraging AI and positioning 5G as the key driver for network innovation and application expansion.
According to the Ministry of Industry and Information Technology (MIIT), by the end of May, the number of mobile service users in China reached 1.76 billion, an increase of nearly 20 million since the end of 2023. Among these, 905 million are 5G users, up by more than 80 million over the same period, with a penetration rate of 51.3%.
Despite high 5G penetration, future growth necessitates a shift towards more advanced and promising sectors, such as 5.5G and AI. The term "5.5G" or "5G-Advanced" refers to the transitional phase between 5G and 6G, offering enhanced functionalities, broader coverage, higher speeds, ultra-low latency, and better multi-device connectivity compared to 5G.
GSMA Chairman Mats Granryd described China's 5G growth as "astonishing," with connections expected to exceed 1 billion by the end of 2024. A significant growth driver for Chinese operators is cloud revenue, now accounting for 12% of total income, a six-fold increase since 2020, reaching US$11 billion over the past three years. Moreover, 5G is projected to significantly boost China's GDP, doubling from US$130 billion in 2023 to an anticipated US$260 billion by 2030.
While telecom revenues showed a moderate 3.7% year-on-year increase to CNY738.7 billion in the first five months of 2024, emerging sectors like cloud computing and big data exhibited robust growth rates of 16.2% and 48.2%, respectively. IoT business revenue grew by 15.4%.
China Unicom reported that while broadband services saw only a modest 2.3% growth last year after peaking at around 30% in 2014, intelligent data service revenues, though still a small part of total income, demonstrated impressive growth rates.
In the world's largest 5G market, Chinese telecom operators' continued transformation hinges on the limited growth potential of mobile services. In contrast, digital services across various industries show promising growth potential. With 5G-Advanced empowering different sectors, the traditionally mobile service-centric telecom industry is poised for a new era of growth, evolving into tech service companies driving digital transformation across industries.
