China Mobile's transformation dilemma: organizational change is imperative
KAIVPS.COM On December 9, it was reported that the three major telecom operators had a rough year in 2015 due to the anti-corruption storm, speed increase and fee reduction, Internet transformation and central enterprise reform. In addition to the impact of OTT such as external mobile Internet, the past "golden decade" of telecom operators has gone forever. In fact, the three major telecom operators have reached the final choice of transformation: return to the role of public welfare state-owned enterprises and pipeline operators to the left, and seek a place of "Internet+" to the right.
As the world's largest mobile operator, China Mobile's every move in the past year has attracted global attention. Under internal and external pressure, where is its transformation path going? How effective? What are the impacts on the industrial chain? This paper will conduct in-depth analysis from multiple dimensions such as China Mobile's strategic planning, business transformation, competitive strength, and future outlet.
Build the world's largest 4G network
After more than a year of development, China Mobile under the "race" has built the world's largest 4G (TD-LTE) network in the first half of this year. At present, China Mobile has more than 240 million 4G online users, with a penetration rate of nearly 30%.
Data from the Ministry of Industry and Information Technology shows that since the second half of 2015, China's 4G users have increased by more than 25 million per month, accounting for 60% of the global monthly new users.
The main reason is the rapid popularization of 4G terminals and the rapid deployment of networks. In the process of domestic 4G commercial use, the construction of 4G network and the commercial use of 4G mobile phones are basically synchronized. The market share of 4G mobile phones has grown from 1.3% in January 2014 to 83% in September 2015, which only took 21 months.
Among them, in terms of domestic 4G mobile phone sales, China Mobile's 4G mobile phone sales have always accounted for more than 72%. At the same time, the selling price of 4G mobile phones has been declining. At present, the lowest selling price of TD-LTE/TD-SCDMA/GSM three-mode mobile phones has dropped to less than 250 yuan.
TDD and FDD are the two technical systems of 4G networks. At present, 50% of 4G base stations in the world use TDD technology, of which China Mobile is the operator with the largest number of TDD base stations. According to the plan, by the end of 2015, China Mobile will build more than 1.2 million TDD base stations, more than any operator in the world.
After experiencing 2G fast running and 3G jogging, China Mobile has turned back to the "fast running elephant" on 4G.
The decline of traditional business has intensified
The ship is hard to turn around. It is most appropriate to describe the transformation that China Mobile has been calling for for many years.
The rapid popularization of smart phones has brought about the rapid development of mobile Internet. Telecom operators have provided high-speed networks, but also suffered from the impact of emerging services.
Among the three major operators, the number of mobile phone users in China accounts for more than 70%, so the impact of mobile Internet OTT enterprises is the most serious. Affected by this, the SMS revenue of China Mobile has declined by 0.9% in 2011, expanded to 4.8% in 2012, reached 6.5% in 2013, and approached 10% in 2014. In addition to short messages, voice calls and international roaming have declined to varying degrees.
In the long run, the revenue of SMS, MMS and voice services of telecom operators has been declining, but the surge in user traffic of China Mobile is not proportional to the operating income. For example, China Mobile's traffic revenue increased by 58.6% in 2013, but its traffic benefit was far lower than that of voice and SMS, which led to a sharp decline in China Mobile's profits.
In the first half of 2015, China Mobile's net profit was 57.3 billion yuan, down 0.8% year on year. The revenue from data business reached 151.5 billion yuan, up 24.3% year on year, accounting for 50.6% of the revenue from communication services, while the revenue from wireless Internet service reached 100.9 billion yuan, up 40.1% year on year, which is the primary driving force for revenue growth.
It should be pointed out that China Mobile has more than 800 million mobile phone users, and currently 4G users account for less than one third. The growth of data traffic still cannot hide the decline of traditional business, and China Mobile urgently needs business transformation.
Barriers to transformation
In the 2G era, voice and SMS are the main businesses of operators, and China Mobile has grown into a mobile communication giant in China by virtue of the network effect of voice services. With the construction of 3G network and the development of service market, operators have entered a new stage: voice service is no longer the mainstream, and traffic management has become the key.
In the 4G era, all the business of operators comes from traffic, which is still just needed for the growth of the network society. However, in the face of the increasingly growing telecommunications industry, and the alternative competition from OTT, the telecom operators should avoid becoming a pure network pipeline, and transform their traffic operations to make clothes for others.
For this reason, China Mobile has proposed a very clear three curve development mode. The so-called "three curves", that is, the first curve is China Mobile voice and short multimedia messages, which are now declining at an annual rate of 15% - 20%; The second curve is traffic management, mainly driven by 4G; The third curve is digital services.
To realize the development mode of three curves, China Mobile clearly transformed from network, terminal and marketing to traffic management. Among them, the annual network construction of more than 200 billion yuan has made the 4G base stations of China Mobile close to the number of 2G networks built for more than 20 years, and the population size covers about 85%.
With a good network foundation, the development of terminals can be described as natural. In order to promote the development of the terminal industry chain, China Mobile has set up a terminal company to guide and promote the development of the entire terminal industry. At present, the entire TD and TD-LTE terminal industry chain is relatively complete, and almost all chip and terminal manufacturers support it.
The problem is that Mobile has been hesitant in the turn of marketing. According to Tencent Technology, there are always disagreements within China Mobile on whether to stick to the network pipeline, do intelligent network pipeline or open business like the Internet. In terms of specific implementation, the establishment of professional business companies is out of touch with the market.
Integrating the original five content bases of reading, music and games, the newly established Migu Company of China Mobile announced this year that it would become a platform for the integrated development of traditional media and emerging media.
The establishment of Migu Culture Technology Co., Ltd. is the first step taken by China Mobile to explore professional operation for mobile Internet business, and it is also a crucial step. It has important strategic significance for China Mobile to comprehensively expand its 4G development advantages, and focus on promoting entrepreneurial layout and innovative development.
Migu's biggest brand and the envy of other mobile Internet media peers is its perfect access platform and related support. That is to say, for CP or SP, it can realize the integration of services from product access, product display and distribution, product landing channel to billing and agent charging. Compared with most mobile Internet platforms that rely on advertising revenue or the mode of "basic functions are free, advanced functions are paid", Migu has unique advantages in how upstream resource providers convert resources into revenue.
For example, China Mobile currently has more than 800 million customers, high-quality network resources and rich business operation experience. As the largest TV broadcasting agency in China, CCTV has rich content copyright resources. The two sides jointly build a platform to open up end-to-end whole network management from music, reading, video and other content broadcast control to content services, which is bound to have a big impact on video websites and other content service platforms. The 800 million users of China Mobile are the most envious wealth of other mobile Internet application platforms, and also a promising gold mine for Migu.
So, what are the odds against Internet giants? First of all, the system of operators cannot be freed. According to the thinking of China Mobile, China Mobile will move from the current group mode of "group provincial company local company" to the coexistence of multiple specialized companies.
According to the principle of centralized operation of Migu, provinces, professional companies and directly affiliated units cannot conduct business operations in the fields of music, video, reading, games and animation, cooperate with third-party businesses in the fields of Migu, or provide billing for the above fields.
Then, how Migu Company handles the business cooperation relationship with branches at all levels in 31 provinces and local areas is a big problem. After all, each province has always had its own cooperation business to improve traffic performance. Now all of them belong to Migu, and cooperation and rights will take some time.
And the Internet company just established last month, although it is a further promotion of China's mobile business transformation after Migu, but it took three years to appear. What is its relationship with Migu? There is no clear answer at present. However, it can be guessed that the Internet company first proposed to set up lags behind Migu, which has been brewing for less than half a year. This shows its complicated relationship and game.
The future lies in organizational reform
With the arrival of 4.5G and 5G in the future, mobile Internet will become more popular and applications will become more abundant, and OTT business will develop faster. An Ericsson survey shows that by 2016, OTT service traffic is expected to account for 71% of mobile data traffic. OTT service will put more and more pressure on operators in the future, and video applications will become the main driving service.
