Forecast 2023: Operators will reap new value in the new changes in the industry

In 2022, China's macro-economy will face multiple downward pressures, social consumption will be affected by income slowdown, weak expectations and other factors, and the digital economy will accelerate its development in an all-round way driven by the epidemic. Under such fundamentals, the communications industry has been able to maintain a high growth tone in a difficult environment. According to the data of the Ministry of Industry and Information Technology, from January to November, the national telecom business revenue reached 1450.4 billion yuan, an increase of 8% year on year, which is a hard-won figure. In 2023, we expect that China's macroeconomic environment will improve, but the momentum of recovery is still weak, and the pain in the post-epidemic era still exists. Under this premise, Celexin makes the following research and judgment on the new changes that telecom operators may face in the personal, family and government-enterprise markets in 2023.

Personal market: 5G upgrade space may be limited, vertical scenarios may bring new potential tapping, while the growth momentum still emphasizes value management.

Compared with the household and government-enterprise markets, the impact of the economic downturn and consumption contraction on the personal mobile market will be more obvious. Due to the lack of "killer" applications, the current 5G revenue model of operators is more based on terminal and package upgrades. The reduction of consumer's willingness to purchase terminals and upgrade mobile consumption will directly affect the 5G growth space of operators. Although the overall environment is recovering in 2023, it will take time to recover, and the impact of the early downturn will continue. According to IDC's prediction, the shipment volume of China's mobile phone market will decline by 0.9% year-on-year in 2023, and the decline will narrow. It will not be expected to rebound until 2024; Due to homogeneity, it is difficult to significantly improve the attractiveness of smart phones to consumers; The replacement cycle of smart phones will continue to increase to 34 months. To this end, operators need to adjust their expectations of the 5G opportunity space that can be obtained from the aircraft exchange market, and pay attention to and actively explore the potential of other scenarios.

With the continuous refinement of the market, some vertical scenes may grow into new growth space, such as live broadcast scene, digital village scene, small and medium-sized enterprise cluster scene, etc. The common characteristics of these vertical scenarios are large scale, strong commonality of demand, but high barriers. Unlike the general scenario, the vertical scenario focuses more on the design ability of counterpart products, ToB expansion ability, BC collaboration ability, etc., and has higher requirements on the professional and financing ability of operators.

Adhering to value management is still the main line of personal market operation in 2023. Before the emergence of "killer" applications, upgrading and "package adding" are still the main means for operators to add value to existing users. Of course, we can't ignore the value space brought by content, application, rights and interests and the importance of producting them. Different from the past, the era of computing power needs the support of computing power products. Some personal cloud applications and cloud products will have their computing power attributes explicit, which will be packaged into computing power products by operators to make up for the temporary market gap. For future applications, operators will continue to explore. 5G new applications, computing power new products, XR yuan universe, etc. are still hot value tracks.

Family market: The value-added space brought by smart families is highly expected. "Gigabit+FTTR+smart home application" has become the main theme of seizing the value highland, and the enclosure competition around smart communities and digital villages is gradually becoming white-hot.

The smart home market has been proved to be one of the important growth poles for operators in the past two years and the next stage. Taking China Mobile as an example, its 2022 semi-annual report shows that the income increment of the household market contributed 9.4 billion yuan in the first half of the year, far higher than 500 million yuan in the personal market and 5.3 billion yuan in the emerging market. The development of China Telecom's home market also shows its vitality: the third quarter of 2022 reported that the income of smart families maintained rapid growth in the first three quarters, driving the comprehensive ARPU of broadband to reach 46.6 yuan, and the value contribution of smart families continued to increase. With the continuous upgrading of broadband technology, the standardization of smart home market, and the deepening of consumer awareness, Celexin believes that the smart home market still has considerable value space to be explored, and will be an important market source for operators' income growth and business value-added in the next few years.

With regard to the competition trend in 2023, Celexin believes that the following two main characteristics may occur:

First, the main theme of the competition will revolve around "gigabit+FTTR+smart home application". In the first half of 2022, Chinese operators launched a gigabit war, after which the development of FTTR was accelerated. Gigabit upgrade and FTTR deployment acceleration will form another new outlet for the development of operators' basic network. According to Omdia's report, it is the general trend for operators to grade broadband packages in terms of speed and home network quality. FTTR ensures higher network quality, thus improving the broadband level, which is consistent with the existing tariff packages of operators. At the same time, it also provides many opportunities for operators to promote the creation of new business models on the basis of strengthening the existing business models. Omdia also predicted the growth of FTTR: among the global FTTH users, the proportion of FTTR will increase rapidly. By 2030, China's FTTR will lead the world, reaching more than 25%. Cylixin believes that 2023 is a key year for FTTR development. Operators need to seize the opportunity and build relevant terminal, product, marketing, word of mouth and other systems. In addition, the development of whole-house intelligence will also be accelerated and the scenario-based application will be further expanded. In addition to mature scenarios such as AI security and lighting, the demand for emerging scenarios such as home office, education and health care will also grow with the change of social trends. The relevant layout exploration of operators may receive more explicit market feedback.

Second, the smart family enclosure competition in the name of smart community and digital village will be more intense. As the digital application scenario closest to the value center of smart family, smart community and digital village are also endowed with the functions of enclosure and customer touch by operators while helping the government and people build smart governance and digital life. In 2022, the three operators will inject more energy into the development of smart communities and digital villages. It is expected that this kind of enclosure competition will be continued and surpassed in 2023. In response to competition, operators need to solve the problems of entry and transformation in an orderly manner, and build a set of B (government enterprise) C (public) collaborative integration architecture system from inside to outside. Celexin also believes that the demand for BC integration and collaboration is not only reflected in smart society