Data has stacked up on the impact of Covid-19 on the Chinese telecom sector from the ground zero of the coronavirus pandemic, just as the lockdown on Wuhan officially ended on 8 April, 2020.
On 23 January, 2020, China implemented a lockdown on the province of Hubei, encompassing a population of 57 million people, including the city of Wuhan, where the virus originated. Following that, the Chinese government implemented various levels of measures across China to restrict the movement of people, upending commerce on a massive scale in the process.
China Covid-19 lockdown saw a decline in telco subscriber numbers
According to the Ministry of Industry and Information Technology (MIIT), China reported 1.59bn mobile users in February 2020, which declined from 1.6bn in Q4 2019, before the lockdown. This represents a -0.74% decline in subscriber base after a slight recovery in March 2020. This a rarity given that quarter-on-quarter net gains have been consistently reported since Q2 2015 based on MIIT reported statistics tracked by GlobalData. Fixed line subscribers also fell slightly by 1.34m subscribers, representing a 0.70% decline.
In Q1 2020, China Mobile lost 3.98m users, China Unicom lost 7.47m users, while China Telecom managed to register a 0.98m net gain in users on the back of a surprisingly large post-lockdown recovery. Based on MIIT statistics, there was an overall net loss of 11.4m in subscriber losses in Q1 2020. In Feb 2020, the loss was registered at 21.4m.
Cancellation of work phone numbers a contributing factor
According to a comment reported by business telecom industry news site C114, Han Xia, director of the Information and Communication Administration Bureau of the Ministry of Electricity and Information Technology, attributed the subscriber losses to a slowdown of new subscriptions of disrupted telecom sale channels and the cancellation of secondary phone numbers used for work.
Although neither the regulator nor the operators report the breakdown between prepaid and postpaid subscriptions, it is expected that the decline in subscriptions is likely to be more acutely felt by the prepaid segment. On top of the reduction of secondary SIMs due to reduced social and economic activity, travel restrictions mean that a large contribution from overseas visitors has dried up.
The swift recovery in March 2020 did not hold into Q2 2020. Mobile subscription rose a mere 0.35% as fears of a second wave resulted in the country returning back to the situation in Q1 as 108m people were plunged back into lockdown in the Northeast in May. In June, the capital city of Beijing followed suit. The only bright spot has been the uptake of 5G. For example, China Telecom amassed a 70.2m 5G subscription base since launching in November 2019, which may have contributed to the slight gain in mobile subscriptions.
Floods have added to telecom problems
Compounding the misery, torrential rain arrived in South China this season, resulting in floods that have been described as the worst since 1998, affecting nearly 24m people as of 20 July. Around 41,000 homes collapsed as rushing waters undermined the foundations of buildings and telecom equipment has not been spared. Reported in the Chinese media was a communications room that was inundated and 20,000 stations that were withdrawn from service due to the disaster. The floods in China are likely to disproportionately affect fixed infrastructure given the lower elevation and underground positions of the network. China saw the number of fixed subscription lines plunge -1.1% to 187.5m in Q2 2020.
There are also growing fears that the Three Gorges Dam could collapse, which could present itself as a rare Black Swan event leading to mass destruction of telecom infrastructure and property.