Summary of Key Points
The traditional businesses of the three major telecom operators (voice calls, text messages, and data usage) have reached their peak of growth or have even begun to decline: people no longer use voice calls and text messages, and while data usage is increasing, the revenue generated is decreasing. Computing power has become a new growth area, with revenue growing at double-digit rates, and capital expenditures are shifting towards this sector. However, the competition in the computing power market is fierce, with internet cloud service providers (such as Alibaba and Huawei) holding a dominant position, while telecom operators are still at the basic stage of selling hardware. Nevertheless, telecom operators possess three unique advantages: networks, data, and trust. If they can shift from selling hardware to offering customized solutions, they have the potential to gain a foothold in the computing power market.
1. Traditional Businesses Are Facing Decline: Fewer People Use Voice Calls and Text Messages, and Data Usage Is Losing Money
This is evident in our daily experiences—text messages are mostly used for receiving verification codes, and people prefer to use WeChat for calls. Data also supports this trend: mobile call duration decreased by 6.2% in the first half of the year, fixed-line calls decreased by 20.4%, and text message revenue plummeted by 12.9%.
What's more surprising is the situation with data usage: overall data usage increased by 17.7%, yet the revenue from data services for the three major operators decreased (mobile communication services revenue fell by 5.7%, and telecommunications revenue fell by 1.1%). Why?
- User Saturation: There are 1.847 billion mobile users, more than the national population, leaving no room for new users.
- Falling Tariffs: Fierce competition has led to lower data prices, resulting in a continuous decline in the average revenue per user (ARPU).
- High Costs and Increased Taxes: Maintenance costs for base stations and data centers are substantial, and the value-added tax on data usage increased from 6% to 9% this year, further squeezing profits.
Traditional businesses are on the decline, and telecom operators must find new sources of revenue.
2. Computing Power as a Lifeline: The Three Major Operators Are Betting Big, with Growth Outpacing Other Services
Computing power, simply put, refers to the ability to process and analyze data, which is essential for tasks like training large AI models and processing large amounts of information. In the first half of the year, the computing power businesses of the three major operators saw significant growth:
- Mobile computing power revenue was 52.9 billion yuan, up 14%, accounting for 22.6% of total revenue, becoming the fastest-growing segment.
- Unicom's computing power revenue was 41.9 billion yuan, up 13%, and it was identified as the "leading driver of overall growth."
- Telecom's intelligent services (including computing power) revenue was 31.1 billion yuan, up 7.1%.
They are also investing heavily in computing power infrastructure: total capital expenditures for the first half of the year were 117.5 billion yuan, with 34% (about 40 billion yuan) allocated to computing power networks, a 80% increase from the previous year. For example, Mobile built a super-large data center in Hohhot with a total computing power of 20100P, which is the largest core node in the group. For telecom operators, selling computing power is not a matter of choice but a matter of survival.
3. A Fierce Competition in the Computing Power Market: Internet Giants Dominate, While Operators Are Still Selling Hardware
The computing power market is not dominated solely by telecom operators. Internet companies like Alibaba, Huawei, and Tencent have been active in this field for a long time and hold a significant share:
- IDC data shows that in the public cloud IaaS market (basic computing power services), Alibaba Cloud accounts for 27.9%, while Telecom and Mobile together account for only 22.2%, and even with Unicom, the total is 30%.
- Internet companies have a competitive advantage due to their "full industrial chain" approach: Alibaba Cloud manufactures its own chips, develops large models (such as Qwen3.7-Max), and builds platforms (like Bailian), offering a range of services from hardware to software and ecosystems, generating high-value profits. Huawei focuses on industry-specific solutions, and Tencent has a strong presence in various scenarios.
In contrast, telecom operators are still at the basic stage of renting GPUs, hosting data centers, and selling bandwidth—essentially, they are continuing to play the role of "pipe providers," just with a different product. Moreover, they are no longer the only players in the market and could be replaced at any time.
4. Three Unique Advantages of Telecom Operators
Despite the fierce competition, telecom operators have three unique advantages that others cannot easily match:
1. Network Advantage: All computing power needs to be transmitted and managed through networks. Telecom operators control the national backbone networks and edge data centers, enabling them to integrate computing and networking capabilities. For example, if a company in Guangzhou needs low-latency computing power, they can allocate it from a nearby edge data center, which Alibaba and Huawei cannot do. Mobile's "computing network brain" can manage up to 147.7EFLOPS of computing power, equivalent to 1477 billion calculations per second.
2. Data Advantage: Large model training requires industry-specific data, such as user behavior, location information, and data from government and enterprise scenarios, which internet companies do not have access to.
3. Trust Advantage: Industries such as government, finance, and military have high security requirements, and telecom operators are trusted due to their compliance and reliability. For instance, Telecom serves 39,000 government and enterprise clients, with a 96% penetration rate among central state-owned enterprises.
These advantages are the core competencies of telecom operators and cannot be easily copied by others.
5. The Key to Success: Shifting from Selling Hardware to Selling Solutions
To thrive in the computing power market, telecom operators must move beyond selling hardware and offer customized solutions:
- Selling computing power means providing the hardware and letting customers use it themselves, earning a margin on the difference.
- Selling solutions means addressing specific problems for customers, such as providing AI-based traffic management for smart cities or intelligent monitoring for factories, generating higher-value revenue.
This represents a challenge for telecom operators, as they are accustomed to selling standardized packages. However, offering customized solutions requires a deep understanding of industries and the ability to respond quickly. For example, developing a smart city solution requires knowledge of government, transportation, healthcare, and other sectors, as well as integration of computing power, models, and ecosystem partners. This is a challenging task, but it is essential if they want to avoid losing the largest share of the market to internet companies.
Telecom operators need to step out of their comfort zones and delve into various industries; this is their last chance to succeed.
Conclusion
The traditional data business of telecom operators has reached its limit, but computing power represents a new opportunity. Although they face competition from internet giants, they have unique advantages that give them a competitive edge. By shifting from selling hardware to offering customized solutions, they can find their place in the new era of computing power. This transition is difficult, but it is necessary if they want to survive and thrive in the market.