Weak consumer spending and regulatory headwinds continue to weigh heavily on China’s telecommunications sector, as lingering economic pressures dampen performance across the board. China Mobile and China Telecom, the two largest telecom operators in the country, published their third-quarter financial figures this week, revealing declines across almost every operational segment. The lackluster results underscore the broader economic challenges facing the nation, where sluggish consumer confidence and structural taxation shifts have combined to create a difficult operating environment for state-owned enterprises.
China Mobile, the country’s dominant mobile network operator, reported that its earnings for the third quarter fell by 12.5% compared to the same period last year, dropping to 27.5 billion Chinese yuan, which translates to approximately US$4.1 billion. Alongside the sharp decline in net income, the company’s overall revenue contracted by 3.4%, settling at CNY242 billion, or roughly $36.2 billion.
Meanwhile, its rival China Telecom posted a net income of CNY6.6 billion, equivalent to about $988 million, marking a steep 15.4% drop year-over-year. China Telecom’s revenue similarly contracted, sliding by 2.9% to reach CNY121.9 billion, or approximately $18.3 billion.
The state-owned telecommunications giants did not offer a detailed explanation for the lower performance in their financial releases. However, these figures follow similarly tepid financial results recorded during both the first and second quarters of the year. Industry analysts note that the firms have been acutely impacted by a value-added tax hike that was implemented at the beginning of the year. This fiscal burden has collided awkwardly with broader macroeconomic trends in China, where the wider economy continues to struggle to stimulate and boost sustainable consumer confidence.
While the telecom sector has increasingly looked toward high-growth digital segments to diversify its revenue streams, the rapid expansion in areas like cloud computing, artificial intelligence, and enterprise-focused services has simply not been enough to compensate for the stagnation in the core consumer business. China Mobile noted that revenue from its non-core and emerging digital services grew by an impressive 9.9%. However, this bright spot was overshadowed by the fact that its main traditional business lines contracted by 5.1%, while earnings before interest, taxes, depreciation, and amortization slumped by 6.9%.
Tower Downturn
The broader weakness within the industry was further highlighted by performance metrics covering the first nine months of the year, running up to September. China Mobile reported a net income of CNY106.2 billion, or $15.9 billion, representing a 7.9% decrease over the nine-month period. Its overall revenue for the same timeframe experienced a modest decline of 1.3%, falling to CNY780.3 billion, which translates to roughly $116.9 billion. Despite these headwinds, China Mobile reiterated its long-term strategic vision, stating that it would continue its ongoing corporate transformation from a traditional communications operator into a comprehensive technology services enterprise.
On the subscriber front, the company continues to command a massive user base, with its total mobile subscriber count reaching 1.01 billion connections. Within this massive footprint, 702 million users have transitioned to 5G services, reflecting continued network adoption even as financial returns face pressure.
Beyond the major retail telecom operators, state-owned China Tower—traditionally boasting one of the most resilient and bullet-proof revenue streams in the entire telecommunications infrastructure ecosystem—is also experiencing a pronounced downturn.
China Tower reported a 12% fall in its earnings before interest, taxes, depreciation, and amortization for the first three quarters of the year, bringing that figure down to CNY44.8 billion, or approximately $6.7 billion. Total revenue for the infrastructure provider declined by 3.1% over the first three quarters. The company attributed this contraction primarily to a noticeable drop in demand within its core teleco unit, which historically accounts for roughly four-fifths of its total business operations.
Sales of tower assets and leasing services to the major mobile network operators fell by 8% to CNY52.1 billion. Furthermore, the tower tenancy rate—a critical metric indicating how many operators share a single tower structure—declined from an average of 1.79 tenants per tower recorded last December down to 1.77.
Despite the downward pressure on its core tower sharing business, China Tower’s smaller, specialized business segments experienced positive growth. Distributed antenna system revenue rose by 10%, smart tower applications grew by 11%, and energy sales increased by 13%, offering some diversification against the broader telco slowdown.
Reflecting the challenging financial disclosures, all three major state-owned companies traded lower on the Hong Kong Stock Exchange over the course of the week. Shares of China Mobile fell by 5%, while China Telecom experienced a steeper decline of 8.8%. China Tower shares also retreated, finishing down by 5.5% as investors digested the ongoing operational and regulatory pressures facing China’s telecommunications sector.
