Telecom Providers:Faster service, lower fees slow value growth
Government opens category to mixed ownership
The three state-owned brands that comprise the telecom provider category implemented the government’s digital agenda by expanding their networks and investing in faster 4G service, while lowering prices for data consumption. The telecom providers category dropped 12 percent in brand value, ranking it lowest in year-on-year value change among the 21 categories analyzed in the 2018 BrandZ™ China Top 100.
China Mobile, the country’s third most valuable brand, after Tencent and Alibaba, and the world’s largest telecom provider by subscribers, has long dominated the category in China. China Mobile had 867 million mobile subscribers at the end June 2017. In contrast, China Unicom had 270 million mobile subscribers and China Telecom had 230 mobile subscribers. (For context, Verizon leads US telecom providers in number of mobile subscribers with 147 million.)
To fortify the competitiveness of China Unicom and China Telecom against China Mobile, and to accelerate the digitization of China and the rollout of 4G, the Chinese government had allowed the two brands to collaborate on infrastructure development. Now, the government went a step further.
As part of its mix-ownership reforms, and in an effort to strengthen state-owned enterprises (SOEs), the government permitted China Unicom to raise private investment and change its ownership into a state-private mix. The mix is intended to provide the best of both worlds: a clear agenda set by the government, and more profitable and efficient execution because of private-sector influence.
Tencent, Alibaba, and Baidu were among China Unicom’s new stakeholders. Soon after taking on the new investors, China Unicom announced it would establish a unit to commercially leverage its consumer data. The brand enjoyed a strong profit rise, driven primarily by its 4G progress.
China Unicom increased 11 percent in value. Meanwhile, China Mobile, which declined 15 percent in value, continued to strengthen its 4G network and invested in developing 5G technology, planning to offer 5G service by 2020. China Telecom expanded its 4G service. It declined 1 percent in brand value.
China’s telecom providers also faced growing competition from mobile virtual network operators (MVNOs,) that lease, rather than build, network infrastructure. The telecom providers also planned overseas investments to advance the country’s Belt and Road objectives with infrastructure projects in neighboring countries.