China’s telcos to see data revenue offset decline in voice starting next year

PUBLISHED : Wednesday, 29 June, 2016, 9:01am
UPDATED : Wednesday, 29 June, 2016, 9:05am

Revenues from data will start to offset the decline in voice for Chinese telecommunications companies from next year following rising consumer demands for data, according to a report by a leading mobile association.

For Chinese telecom companies, legacy voice revenues fell 15.4 per cent in 2015 due to the widespread adoption of IP messaging services, according to the Mobile Economy Asia Pacific 2016 report released by the GSM Association (GSMA) at the Mobile World Congress Shanghai on Wednesday.

“IP messaging … is the single biggest impact for the lowering of revenue growth,” said Alasdair Grant, head of Asia at GSMA, referring to telecom companies facing increased competition from companies such as Tencent’s WeChat. Apps such as WeChat allow users to text and make voice or video calls using a data or Wi-fi connection.

“At the moment, [revenue] is quite subdued,” Grant told the South China Morning Post.

But despite the decrease in voice revenue, he said there has also been an “incredible growth in data revenues” in China. The report stated that China Unicom, the second biggest telecom company in China after China Mobile, saw a 143 per cent increase in data volume growth over the last year.

The growth in data revenues is largely driven by user demand for data, as a rising number of Chinese smartphone users upgrade to higher-end handsets and move from 3G to faster 4G networks, Grant said.

“What you do see in China associated with [consumers’] migration from 3G to 4G is the incredible consumer demand for data, which will start to offset voice revenue declines from 2017 onwards ... and return [revenue] to healthier growth,” he said.

The report also found that video is currently the biggest contributor to data traffic. China’s video-driven data traffic is set to surpass the US and Korea by 2020, as consumers move towards consuming more over-the-top (OTT) content. In 2015 alone, video represented 54 per cent of all data traffic globally and will hit 75 per cent by the end of the decade.

China’s insatiable appetite for data and high smartphone penetration rate has also encouraged China to be at the forefront of developing standards and strategies for the upcoming 5G network, which is touted to be able to deliver large amounts of data 10 to 100 times faster than 4G networks with a much lower latency rate.

Expected advantages of the upcoming 5G network are large bandwidths, the ability for high capacity traffic and accessibility, all of which allows for widespread connectivity for the Internet of Things (IoT) and smart city applications, according to industry experts.

Both IoT and smart cities have been identified by the Chinese government as important sectors to be developed, presenting huge market opportunities for telecoms to step in and fill the connectivity gap that current 4G networks are unable to efficiently provide, said Wilson Chow, Technology, Media and Telecommunications leader for PwC in China and Hong Kong.

Neil Wang, managing director for Frost & Sullivan China, said that the country’s lead in 5G development will allow it to not only better capture opportunities to commercialise 5G technology, but also allow for more digitalisation in all aspects of Chinese society.

“Based on 5G technology, China is able to create a platform of a combination of smart mobile apps, bandwidth and cloud, together with other infrastructure and public utility industries to become the basis of the operation of society,” said Wang.