Rural 4G accelerates Telecom Unicom wins low-band dividends

Rural 4G acceleration, China Telecom Unicom has reaped low-band dividends, and conquering the rural market has become the only way
to narrow the gap between the two and mobile.

Recently, the Ministry of Industry and Information Technology issued Documents No.
193 and No.
194, while approving China Telecom and China Unicom to deploy 4G networks
in the low-frequency bands of 800M and 900M respectively.
800M and 900M are regarded as ideal frequency bands for rural 4G network deployment, and the deployment of 4G networks in this frequency band can save about 50% of construction costs
.
This move aims to help operators release low-band dividends and reduce the construction costs of operators' mobile networks in rural areas, in order to complete the State Council's goal
of "fully covering urban and rural areas with 4G networks by the end of 2017".

In addition, the Ministry of Industry and Information Technology also officially launched the second batch of telecom universal service pilot work on June 7, and plans to allocate special funds from the Ministry of Finance to support about 50,000 administrative villages with broadband
access.
The first batch of pilot telecommunication universal services was launched at the beginning of the year, with an allocation of at least 2.
6 billion yuan, and plans to support about 40,000 villages with broadband
access.

In fact, today's rural market has become the last growth point of telecom operators, and it is also the intersection of the competition of the three operators
.
Moreover, for telecom and China Unicom, after obtaining low-band policy dividends, conquering the rural market has become the only way
for them to narrow the gap with mobile.

In 2004, the Ministry of Industry and Information Technology organized telecom operators to launch the "Village-to-Village Project"
.
Between 2004 and 2015, basic telecom operators invested more than 90 billion yuan to connect 210,000 administrative and natural villages with telephones and 150,000 townships and administrative villages to broadband
.
Among them, China Mobile has invested 45 billion yuan in more than 10 years, built 62,000 base stations, and provided telephone services
for 77,000 natural villages.

According to data at the end of 2015, although rural infrastructure has been greatly improved, more than 50,000 administrative villages still do not have broadband access, and 150,000 administrative village networks need to be upgraded
.
In addition, only China Mobile began to start rural 4G construction, and China Telecom and Unicom only planned "4G to the countryside"
at the end of 2015.

It should be pointed out that over the past decade, operators have spent less than 10 billion yuan per year on average in rural areas, accounting for less than 3%
of the total capital expenditure of the telecom industry.
That is, operators invest 32 times
more money in urban areas than in rural markets.
Taking China Mobile as an example, the number of rural base stations is 62,000, accounting for only 3%
of the total number of base stations.
A number of domestic telecommunications equipment manufacturers told reporters: "At present, the 4G coverage in rural areas in China is general, and it can only be said that it has just begun
.
”

The reason for the significant gap between urban and rural construction is that the high capital investment and low utilization rate in rural areas are that the return on investment is seriously disproportionate
.
Miao Wei, Minister of Industry and Information Technology, once gave an example: "The cost of building a wireless base station in remote areas is nearly one million yuan, plus long-term operation and maintenance, the cost is higher
.
" Wei Leping, director of the China Telecom Science and Technology Commission, also ridiculed: "The broadband built in remote areas in the west cannot recover its cost
for a hundred years.
" ”

In May 2015, the State Council issued the Guiding Opinions on Accelerating the Construction of High-Speed Broadband Networks and Accelerating Network Speeds and Fee Reductions, proposing to significantly increase broadband penetration and speed, and achieve full coverage of 4G networks in urban and rural areas
by 2017.
Subsequently, the executive meeting of the State Council in October 2015 proposed to reform and innovate the universal service compensation mechanism for telecommunications to support the construction of rural and remote areas to promote the coordinated development of urban and rural areas
.
The State Council plans to invest a total of 140 billion yuan to achieve broadband access to about 50,000 unconnected administrative villages by 2020, provide broadband upgrades for 30 million rural households, and gradually achieve wireless network coverage
.
This also means that the annual capital investment of operators in the rural market will increase by at least 3 times
.

At the end of 2015, the Telecom Universal Service Fund was launched, and the Ministry of Finance began to subsidize rural broadband
.
In the rural areas of the eastern, central, western and autonomous provinces, the Ministry of Finance provides operators with funds of 15%, 20%, 30% and 35% of their construction costs
, respectively.

However, the Telecommunication Universal Service Fund only targets fixed broadband networks and does not cover wireless broadband
.
A few days ago, the Ministry of Industry and Information Technology issued two documents: "The Ministry of Industry and Information Technology agrees that China Telecom uses the 800M and 2100M frequency bands to carry out LTE networking" and "The Ministry of Industry and Information Technology agrees to China United Network Communications Group Co.
, Ltd.
to carry out LTE FDD injection test in the 900MHz band", which greatly reduces the construction cost
of rural 4G.

It is worth mentioning that in February 2016, China Telecom has launched the centralized procurement of rural 4G equipment, and is expected to build 130,000 4G base stations
in rural areas.
At the same time, China Mobile plans to build 300,000 base stations in 2016, mainly in the rural market
.
The number of rural base stations will increase
significantly.
The village-to-village communication project will be upgraded from "village-to-village telephone" to "village-to-village 4G"
.

The purpose of building rural 4G aims to allow more than 400 million 2G users to switch to 4G networks as soon as possible, and promote the popularization
of rural entrepreneurship projects through the mobile Internet.

By the end of April 2016, the number of 4G subscribers in Telecom, China Mobile, and China Unicom reached 79.
52 million, 390 million, and 63.
98 million, respectively, and the total number of 4G subscribers reached 534 million
.
At the same time, the total number of domestic mobile phone users has reached 1.
297 billion, and the proportion of 4G users has reached 41.
2%.

At the same time, the three operators still have nearly 300 million 3G users and 450 million 2G users (including PHS), accounting for nearly 23% and 34.
7% of the total users, respectively, of which China Mobile has 300 million
2G users.
According to the National Bureau of Statistics, in 2015, the total population of Chinese mainland was 1.
375 billion, the urban permanent population was 770 million, and the rural population was 540 million, and 2G users were mainly distributed in rural areas
.

It is worth mentioning that "in 2014, the three operators jointly applied to the Ministry of Industry and Information Technology for low-band 4G networking
.
A China Mobile insider told reporters: "But now, only telecom and Unicom have been agreed, and they have not passed the approval of mobile, and if mobile can also use 900M networking, Telecom Unicom is basically completely out of play
.
" ”

Administrative licensing of the telecommunications industry is the main means
of market supervision by the Ministry of Industry and Information Technology.
In the 3G era, through the issuance of 3G licenses of different formats, the 3G market has basically maintained three parts of the
world.
In the 4G era, in order to support the TD-LTE industry, the Ministry of Industry and Information Technology gave priority to issuing TD-LTE licenses that are more conducive to China Mobile, while FDD licenses suitable for telecom and Unicom were delayed for more than
a year.
This has also created China Mobile's advantages
over telecom and Unicom in the 4G market.

Now, through the administrative license of low-frequency bands, the Ministry of Industry and Information Technology intends to cultivate markets for telecommunications and China Unicom and narrow the gap
between the three operators.
"The spectrum resources of 800M and 900M are conducive to rapidly improving coverage, promoting VoLTE services (4G voice), and preparing for 2G retirement
.
" A Chinese telecom source analyzed: "Mobile uses 1800M spectrum deployment, the cost is at least twice that of it, and the lack of optical fiber resources in rural areas requires a large amount of money to build an optical cable network
.
" ”

However, in contrast, capital costs may not be a constraint
for China Mobile.
At the end of 2015, China Mobile's cash flow was 34 billion yuan, while the cash flow of China Telecom and Unicom was -21.
5 billion yuan and -44.
6 billion yuan, respectively, and the asset-liability ratio of both operators exceeded 50%.

In addition, in 2016, China Mobile United Mobile Manufacturing Company launched a customized machine plan, planning to reduce the price of 4G mobile phones from about 1,000 yuan to less than 300 yuan, and at the same time launched terminal subsidies to attract 2G users to switch to 4G
with extremely low terminal prices.

In addition, it should be pointed out that the average expenditure of 4G users is 1020 yuan / year, while the per capita disposable income of rural users in China is 11422 yuan / year, if promoted according to the current 4G tariff, 4G cost accounts for 10% of rural per capita income, beyond the affordable range
of rural users.
To accelerate the migration of 2G users to 4G, operators also need to launch specific packages
for rural markets.