China's 5G market is not as big as it seems

China’s telecoms operators are reporting impressive growth in 5G customer additions, but they are not all true 5G users.

China Telecom was the last of the big three Chinese operators to share first-half financials this week, unveiling a slate of figures that showed some revenue growth but essentially flat profits. But while the telco, like its peers, talked up its 5G business, there are indications that 5G is not advancing as quickly in China as the figures might first suggest.

China Telecom is trumpeting having signed up 37.84 million customers to 5G packages as of the end of June, which it says equates to 11% of its overall mobile customer base.

But customers using 5G plans are not necessarily using 5G devices. And with all of China’s big telcos slashing 5G package prices in the past few months, it could well be that customers are being drawn in more by attractive tariffs than by a desire to get their hands on the latest hardware and its related capabilities.

In early summer the local press was awash with reports of telcos launching lower cost 5G price plans. In June, China Daily reported that the cheapest plan on the market stood at 69 yuan, or less than US$10. Market leader China Mobile was offering the heftiest discounts at that time.

China Mobile reported having 70.2 million 5G package customers at mid-year, which is a sizeable figure by anyone’s standards. In its results presentation the operator noted that during the first six months of 2020 it “encouraged customers to subscribe to the 5G packages with 5G devices,” but did not break down figures to show how many had actually done that.

Rival China Unicom was even more cagey when it posted first-half figures last week. The operator did not share any 5G uptake stats, other than to say that it had “promoted 5G package services in a paced and targeted manner to align with the progress of 5G network construction and handset supply,” and that 5G subscriber numbers are “growing steadily.”

All of which begs the question, how many actual 5G subscribers are there in China?

5G terminal connections reached 88 million at the end of July, Xin Guobin, vice-minister at the Ministry of Industry and Information Technology told Xinhua News Agency in an interview published on the MIIT’s website late last week.

That’s 20 million fewer than China Mobile and China Telecom’s combined 5G package total, without taking China Unicom into account.

That’s not to say the telcos are massaging the figures, of course. It’s more to make the point that while China does have a solid start in 5G, it is not bursting at the seams with early adopters.

Unlike, South Korea, for example, where 7.4 million 5G connections at the end of June, according to the Ministry of Science and ICT, equated to 10.6% of the country’s overall mobile base.

China’s 88 million 5G users translates to 5.5% of mobile customers, which is an impressive figure when you consider that there are 1.6 billion users in total.

Spending on 5G in the country is also noteworthy. The three telcos are rolling out 5G base stations at a frenetic rate; China Telecom, for example, reported having 210,000 5G base stations in use at the end of 1H, having activated 150,000 in six months.

Dell’Oro Group recently reported that the global radio access market is growing at its fastest rate in close to 10 years, driven by RAN spending in China. Make no mistake, China is a force to contend with on the global 5G stage…if you’re the type for whom 5G is some sort of race, that is.