Author: strategy analytics, Yang Guang

Recently, the registration information of China Radio and television network Co., Ltd. (hereinafter referred to as China Radio and television) was made public and widely reported by the media. In particular, among the top three major shareholders, including State Grid ICT under the State Grid and Internet giant Alibaba, the entry of two heavyweight investors has aroused heated discussion in the industry. As a new force in the world’s largest mobile communication market, it is normal for China’s Radio and television to receive extensive attention from the industry and media. After all, in the development of the industry in recent years, the new forces in large markets have had a significant impact on the development trend of their own market and even the whole industry.

The forces Nouvelles of great powers attract attention

Reliance jio is the youngest operator in the Indian telecommunications market. It is invested by reliance group of Mukesh Ambani, India’s richest man. It began to provide commercial services in 2016. With its radical pricing strategy and the effective integration of connection services with Internet services such as content and e-commerce, reliance jio has become a leader in the Indian mobile communication market in just a few years, and has greatly changed the competition pattern in the Indian market. According to the statistics of the Indian telecommunications regulatory authority, as of May 2020, reliance jio’s share in the Indian mobile communication market reached 34.33%, significantly ahead of Bharti Airtel and Vodafone idea, which ranked second and third.

Since 2020, the parent company of reliance jio, jio platform, has successively obtained 14 investments including industrial giants such as Facebook and Google and top private equity capital such as silver lake and KKR, with a cumulative financing amount of nearly $20 billion. In the environment of novel coronavirus pneumonia causing global economic downturn, Jio Platform can get such a high investment. On the one hand, it shows India’s attraction as a new big power market. On the other hand, it also shows that Reliance Jio’s business strategy and market position have been widely recognized by industry and investment circles.

In neighboring Japan, Rakuten mobile, a subsidiary of e-commerce giant Rakuten, launched 4G commercial services in April this year, officially becoming the fourth mobile network service operator in the Japanese market. In addition to the radical pricing strategy, Lotte Mobile has also found another way in terms of network technology route. Instead of choosing traditional wireless network manufacturers, it has cooperated with open ran manufacturers to become the first operator to deploy open ran equipment on a large scale in mature developed markets. Lotte not only applies open ran, but also develops Rakuten communications platform (RCP) based on cloud native platform, hoping to promote its communication service platform to the international market and become a new platform provider for telecom operators and enterprise customers.

The precedent of reliance jio and Lotte mobile, heavyweight investors such as State Grid and Alibaba, and the 5g Network Co Construction and sharing agreement signed with China Mobile all make the industry look forward to China Radio and television.

China's Radio and television has broad imagination space. Emancipating the mind is the key way to achieve commercial success

China’s Radio and television has broad imagination space

As a new force in the big country market, China Radio and television has indeed created a broad imagination space for the industry. First of all, China Radio and television has unique advantages in content resources. Since the 4G era, content has become a powerful means of differentiated competition for telecom operators. After entering the 5g era, the differentiation ability of data traffic in tariff packages is becoming weaker and weaker, and the importance of content is becoming more and more obvious. Relying on its aggressive connection pricing and rich content application resources, India’s reliance jio has rapidly expanded its user base and established a leading position in the market. However, traditional telecom operators often face many risks and challenges in obtaining content resources or developing content cooperation, such as production experience, capital investment, regulatory policies and so on. Even leading operators such as American at & T did not achieve the expected operating results after spending a lot of money to enter the content industry. As the national team of radio and television system, China Radio and television has inherent advantages in obtaining content resources and grasping regulatory policies. It can turn content resources into a powerful weapon for differentiated competition and seek opportunities in 5g market competition.

Secondly, the existing cable TV customer base and sales service channels can become an important foundation for the development of China’s Radio and television. In the mobile communication market, the biggest challenge faced by new entrants is often how to quickly expand the user base and achieve scale effect. If new entrants have a certain user base, it will be an important help to their business development. For example, before Lotte mobile entered the basic network market, its mobile resale business had about 2.3 million users, which laid the foundation for the start-up of Lotte Mobile’s own network business. According to the data of SARFT, by the end of 2019, the actual number of cable TV users in China had exceeded 200 million. Although the TV startup rate has been declining in recent years, cable TV is still an important contact for connecting users, especially home users. If digital TV and mobile broadband services can be effectively integrated, it may form unique differentiated competitive characteristics.

More importantly, similar to reliance jio and Lotte mobile, China Radio and television also has strong backup. Alibaba’s e-commerce ecosystem, cloud computing platform and the strong influence of the State Grid in the government enterprise market can all become a strong boost for China Radio and television to develop its business in 2C and 2b markets. As a central cultural enterprise, China Radio and television enjoys a unique policy environment. Considering the important role of regulatory policies in the communication and Internet markets, the policy support obtained by China Radio and television will be very important.

Unique challenges faced by China Radio and television

However, with broad imagination space, the development of China’s Radio and television still faces many unique challenges. Unlike new operators independently invested by private institutions such as reliance jio and Lotte mobile, the parent company of China Radio and television is a central cultural enterprise funded by the Ministry of Finance and established and managed by the State Administration of radio, film and television. Radio and television enterprises in various provinces have also been subordinate to the local publicity system for a long time. In this case, it is still uncertain whether the operation and management system and talent structure of China’s Radio and television can adapt to the fierce competition in the current communication market.

Local radio and television networks are subordinate to local publicity systems, and there is no national network operation and management system. The telecom network operation requires the whole network, and the national intensive operation is also the mainstream trend in recent years. Whether the effective integration of radio and television networks in various provinces can be completed in a short time is the primary challenge that China Radio and television needs to face before starting commercial business.

At present, the competition in the domestic telecommunications market is fierce, and the national mobile phone penetration rate has exceeded 110%. After several consecutive years of speed-up and fee reduction, the overall communication tariff level has been at a historical low. At the end of 2016, when reliance jio began to provide commercial business, the penetration rate of mobile phones in India was only 84%. The Japanese market has always been known for the high price of telecommunications services. According to the data of teligen tariff research service of strategy analytics, under various business use modes, the mobile communication service expenditure of Japanese consumers is among the top among the 28 OECD countries. In fact, the Japanese government granted Lotte mobile its fourth mobile network business license in the hope of introducing more competition and reducing the price of telecommunications services. Therefore, compared with reliance jio and Lotte mobile, the market competition faced by China Radio and television is more severe.

As we all know, telecom network service is a highly technology and capital intensive industry. Deploying a national mobile network often requires 100 billion investment. Although China Radio and television has a 700MHz gold band and has signed a network co construction and sharing agreement with China Mobile, which can effectively reduce the cost of network construction, the development of terminal ecology and the construction of marketing channels still need a lot of capital injection. How to effectively raise and use funds will also be a major challenge for China’s Radio and television.

Emancipating the mind is the key to business success

Facing such opportunities and challenges, how should China Radio and television achieve commercial success? The development strategies of reliance jio and Lotte mobile may be used for reference. Both reliance jio and Lotte mobile have introduced non first-line suppliers and are committed to developing their own network technology platform. By cooperating with emerging suppliers and deeply participating in the R & D of network solutions, operators can strengthen their control over the industrial chain and reduce the operation cost of network deployment. At the same time, the introduction of new architecture and deep participation in the development of network platform also help operators improve the development efficiency of new services, accelerate the listing speed of new services, and deal with the rapidly changing competitive environment.

At present, core network virtualization has become a trend, and cloud service manufacturers are also eager to try the telecom infrastructure market. Telefonica recently announced that it will deploy the virtualized 5g core network provided by Ericsson in the German market by using AWS’s cloud service infrastructure. In the domestic market, the 5g lightweight core network developed by Alibaba has also been deployed in the private network scenario. As a new force in the telecom network operation market, if China Radio and television can make full use of Alibaba’s technology accumulation in the field of cloud computing and expand its cooperative relationship with non front-line manufacturers, it is also possible to explore a new way in network technology and deployment strategy, so as to lay the foundation for its long-term sustainable development.

As mentioned above, on the one hand, the integration of provincial radio and television network sales and service system is an important basis for the intensive operation of national one network. On the other hand, building a digital marketing system with online channels as the main body is also becoming an important direction for the evolution of the marketing system of global operators, especially for new operators entering the market, which can accelerate the speed of business provision and reduce costs. If China Radio and television can try to rely on Alibaba’s e-commerce technology and platform to develop the digital marketing system, it is possible to achieve rapid and low-cost customer acquisition.

At the same time, the development of enterprise business and wholesale business is also the business strategy often adopted by the new forces in the market, which can quickly expand the scale of online connection. After continuous market education in recent years, using 5g technology to accelerate digital transformation has become the mainstream consensus of large and medium-sized enterprises, and 5g government enterprise market has also become the focus of competition of the three operators. Both state grid and Alibaba cloud have strong influence in the enterprise market. If China Radio and television can make full use of the deep accumulation of State Grid and Alibaba cloud in the enterprise market, it can not only quickly expand the connection scale, but also seize a favorable position in the competition of 5g government and enterprise market.

Both the construction of technology platform and the improvement of marketing system need corresponding talent team. Especially at the moment of technology upgrading and industry transformation, the construction of talent team is more important. It can be seen from the mid-2020 financial reports of the three operators that they are generally increasing their investment in talent teams. Compared with the three major operators, the talent accumulation of China Radio and television in telecom network and market operation is weak, so it is more necessary to increase investment and establish a more flexible talent system in order to improve its long-term competitiveness in the telecom market.

In short, at the beginning of the 5g era, China’s Radio and television has become a new force in the telecommunications market. It not only has inherent advantages, but also faces unique challenges. Only by fully emancipating the mind, following the development trend of technology and market, and vigorously investing in the construction of talent team, can it achieve commercial success in the face of severe competition.

Responsible editor: GT

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