The Chinese Fixed Line Broadband Market Had A Solid Year

Broadband internet services have become a big focus area for Chinese telecom companies, as they contend with slowing growth in their wireless businesses and declines in the landline phone segment. Below, we provide a brief overview of the developments in the Chinese broadband market over 2016 and review the performance of the big three carriers – China Telecom, China Unicom and China Mobile.

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Factors Driving The Expansion of The Chinese Broadband Market

China has about 720 million internet users, accounting for about 52% of its total population. While roughly two-thirds of the users access the internet using their mobile phones, fixed line broadband services are becoming increasingly attractive for multiple reasons. The government’s Internet Plus policy, which aims to drive the economy via an all-digital strategy, intends to speed up the adoption of broadband services via improved broadband speeds and lower pricing. Moreover, wireline broadband is more cost-effective compared to wireless broadband and offers higher bandwidth required for data-intensive applications such as streaming video. The Tier 1 broadband carriers, defined as companies which own the backbone networks and are also involved in the construction of metro networks, together saw their broadband subscriber base grow by about 13% over the first 10 months of the year.

Performance of Tier-1 Carriers 

China Mobile’s performance over 2016 has been very impressive. despite its relatively late entry (it was awarded licenses in 2014). The carrier added about 20.5 million new subscribers through October, overtaking China Unicom to become the second largest broadband provider.  The carrier has been expanding its broadband operations via a mix of acquisitions and competitive pricing (ARPU is about 40% below wireline market leader China Telecom). China Mobile also stands to benefit over the long term by providing bundled services to its base of around 845 million wireless customers.

China Telecom, which primarily provides wireline services in the southern part of the country, continues to lead the market with about 122 million subscribers. The carrier’s ARPU is higher compared to its peers, owing to a relatively high mix of fiber-to-the-home users (upwards of 75% of total connections) and an increasing emphasis on value-added services including IPTV and Video-On-Demand. China Unicom, which mainly provides broadband services in Northern China, slipped to third place behind China Mobile. The carrier’s net adds were the weakest among major players at about 3.1 million, amid stronger competition. The carrier’s ARPU also saw a slight decline year-over-year.

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