Today, after listening to Comrade Zhong Ping's introduction to Guangdong Company on behalf of the team, the overall feeling is that Guangdong gave me a lot of pressure in the first half of this year, and also gave the group a lot of pressure. I think there are objective reasons for this: First, China Mobile has obtained a fixed-line license and made great efforts in broadband business, which has had a great impact on us through bundling. Just a few years ago, we did not do enough optical fiber transformation in cities, urban-rural fringe areas and towns, which caused the current pressure. Second, China Mobile's 4G license was issued at least four months earlier than ours, which had an impact on our time competitive advantage.
But in addition to objective reasons, I personally think there are subjective reasons: after the adjustment of leading bodies in many regions, such a problem often arises, that is, whether to "cancel the false name". Guangdong is not prominent here. Our most typical province said that 20% of the previous products were fake. If there is a sale, the following employees feel that they can have a rest and don't have to develop so much, resulting in a decline in market share. As a result, they were anxious and couldn't catch up if they wanted to. It can be said that anyone who does this will not be able to get up after the landslide. There used to be an old saying that "the ambition of the three armed forces cannot be taken away", which means that ambition, momentum and morale cannot be lost. I am very much in favor of writing off the real and imaginary numbers, but on the other hand, we must seek truth from facts and not lose our morale.
Fortunately, I saw that Guangdong began to develop in a good direction in September: First, it promoted the transformation of development mode. The pressure of sales expenses has dropped, which is a challenge for the three major operators. Compared with China Mobile and China Unicom, our pressure drops the least, and they feel even worse. It is very painful for us in Guangdong to adjust the growth mode, but we have gradually found a development path under this situation. The second is to strengthen channel segmentation. I think it's good that you have divided the channels into six categories. You have begun to cooperate with the society in the capital of the resident network and taken a good step. Third, the quality of users has improved. Therefore, I am very pleased that I have seen hope from the difficulties as a whole, and it is also the result of the efforts of all cadres and workers in Guangdong.
Specific to how to do the next work, I mainly talk about three points:
First, adjust measures to local conditions and accelerate development.
It should be said that in Guangdong, there are few new markets for users, but as a market for information application and consumption, I think there is still room. For example, from 3G to 4G, the average monthly household flow increased from 190M to nearly 1G, indicating that consumers still have demand. The same is true for enterprises, with greater demand. The key depends on how we meet this demand. We only saw the sales of 4G mobile phones. In fact, there are many other aspects, mainly how to release these capabilities. Therefore, economic growth is very difficult, and our growth rate will be even lower, but on the whole, there are still market opportunities, and the key depends on what we do.
Of the three schools, are others better-looking than us? How should we learn from others? China Unicom has maintained a sustained high-speed growth in the past few years, that is, it has found a specific market under the strong strength of the two major telecommunications companies. For example, from the customer dimension, it found relatively scattered commercial customers, which is what we call cluster market, and it is very accurate; For another example, in the urban-rural fringe, China Unicom has entered a market that we and China Mobile seldom pay attention to. Therefore, we should be good at discovering the market and really grasp the market.
When the group headquarters discussed the differentiation a few days ago, it thought that the decline in sales expenses was an opportunity for us to change our development mode. Let's think about it. Is there a development model that relies too much on marketing costs and mobile phone subsidies? Another example is that we talk about "de-telecommunications", which is actually opposed by many people. But you see, if there is no e-commerce channel, our marketing expenses will be even more tense. When the e-commerce channel accounts for 5% and 6% of the total sales, how much does it save us? How much will we save if we can reach 10% and 20%? And if there are no scattered services on the internet hall, palm hall, Yixin and WeChat, and there is no automatic voice around the phone, how much pressure will the service bring with the growth of our business in recent years? In fact, the number of waiters in the whole group 10000 is decreasing year by year, which is all based on the Internet. These subtle changes are beyond our own experience.
After the changes in the application of information technology in government and enterprise industries in recent years, we have obvious advantages in at least the vertical market of government and enterprise customers and the three major telecom companies. China Mobile envies us, and it is difficult for group customers to get it, which has a lot to do with our transformation in previous years. When I talked about "de-electrification" that day, it was equivalent to overthrowing the Qing Dynasty. People got on bicycles, got on cars and began to brush their teeth, but their braids could never be cut and their jackets could never be changed. In fact, they have recognized many advanced things in the west, but they still can't accept them ideologically, and so is our current "de-telecommunications".
China Telecom, in short, is the promotion business, broadband and mobile phones, which are two core businesses. Now broadband and China Mobile are becoming more and more homogeneous, and they are also beginning to be bundled. Our original binding method is invalid. But let's think about it, can it rise from "selling business" to "selling products"? What customers want broadband to do is watch TV and surf the Internet. The main core is here. Of course, in the future, we can broaden the gateway intelligence, do all kinds of control of smart home on it, and so on. If "Yueme" succeeds, we will be different from our competitors in products. Now the State Administration of Radio, Film and Television is cracking down on Internet TV and boxes, which is a rare opportunity for China Telecom. Sichuan Company passed "0-1-2" (ITV TV is free, driving1broadband and 2 mobile phones), and the TV quality is far from its competitors, with a cumulative growth rate of 10% in September. At present, we are at a disadvantage in the Guangdong market, but in fact it is difficult for other operators to support us, because China Telecom accounts for 60% of the total online traffic, China Unicom accounts for 30%, and the rest accounts for 10%. Where is the flow and who really controls the quality. Therefore, if we switch to optical fiber, it will be difficult for competitors to really compete with us in broadband quality.
From the perspective of mobile business, we are selling mobile phones now, but we don't see that there are many other huge demands for mobile. China Telecom has a security system in the whole network and various anti-attack capabilities on the network, so can it form its own characteristics in the mobile phone market? At the same time, the mobile phone market is no longer just the communication between people, but also the concept of the Internet of Things. In the United States, sensor chips are very cheap, only fifty or sixty cents each. When such a cheap sensor chip is combined with a communication chip (of course, the communication chip is not necessarily 4G/3G, but also WIFI), the Internet of Things is a good opportunity. Let's imagine that every car should have at least one such communication chip to summarize the information on the car in time, and the intelligence of the car and the intelligence of the road are integrated. How many sensors does the road need to be really good? There is also logistics. Now, use the QR code. Because the chip is cheap, a chip may be implanted in the future to automatically send all kinds of information to a specific place. There is also a summary of all kinds of electrical equipment information of smart homes, as well as various wearable products around health care. Do these messages need to be communicated? Is it necessary to collect our comprehensive data? And Japan's control of industrial pollution. For example, a few years ago, I went to Japan to eat beef, and the owner of the store could introduce me to the father, mother and grandfather of the cow I ate until the fourth generation. It turns out that every Niu Yi was born with a chip with WIFI implanted and marked. These small sensors are essentially related to mobile phones and eventually bring us traffic. If we dare not do it, someone will. Of course, I emphasize here that we do the Internet of Things not to study sensor chips, but to collect data and distribute platforms, which is our strength.
If the future mobile service charges are cheap to a certain extent, our market is not to say that there are no people, but to see what we do. We can't just focus on people. Once we open our eyes wider, the market will be colorful. The key is whether we have this ability. Whoever is the aggregator of content will win. Alibaba now raises 21800 million dollars, and everyone envies him. But if it didn't engage in Taobao, Tmall and Alipay, would it be today? So are we today. Business opportunities abound, and China Telecom has this opportunity.
Guangdong has outstanding people and developed economy. See as much as possible, try more, break through more, and see how to seize these opportunities. Of course, the core of innovation lies in the group headquarters, and the main responsibilities of provincial companies are marketing and after-sales service. I am personally optimistic about how to shake the market. We saw that broadband in many cities was under pressure at first, but it basically came back later, mainly relying on quality. We are in trouble, and our competitors are more difficult to deal with than us. China Mobile now claims to have 40 million 4G users, but actually all the numbers, cards and packages used are counted, and there are not so many real 4G mobile phone users. There were 3.3 million 4G users in our group yesterday. Of course, in fact, less than half of people have 4G mobile phones, but it is not easy for 40 cities to achieve such results in just a few days, so I don't think there should be too much pressure. Everybody calm down and really put some thoughts on intensive cultivation. After developing a user, it is necessary to develop application services on it.
Second, lay a good foundation and improve competitiveness.
Guangdong's optical fiber transformation is only 20% in urban areas. You should speed up the settlement. This is our "old job" and we can't lose it. I just said that because our broadband traffic is the largest, we have much more room to adjust the quality on the main network through CDN than other operators. This time, we jointly established a CDN company with China Unicom. Through the cooperation with the society, the quality of our two basic operators has been greatly improved, and we can compete with other Internet companies. In the past, we sold special lines to government and enterprise customers, bought equipment and assembled them through a group of people. Today, we sell "cloud services". In the past, there were actually only two competitors. Today, Internet companies such as Alibaba have sprung up, and we have never felt this pressure. This situation should not be underestimated. Amazon's cloud data center in Zhongwei, Ningxia has almost been built, and will soon participate in the cloud service of small and medium-sized enterprises. Microsoft used to focus on PC, but now it is entering the vertical market. All this is based on broadband, and we can't lose much in the fixed broadband market. Therefore, we must make up our minds to complete the optical fiber transformation of cities, especially high-grade residential areas, urban-rural fringe areas, enterprises and institutions in a short time to improve our competitiveness.
In the construction of 4G, we should seize key cities, Guangdong is mainly on the Pearl River Delta line, and western Guangdong and northern Guangdong should be covered thinly, not everywhere like 3G. This cost is too high. At present, it is well done in areas and big cities with telephone traffic. It should be noted here that the newly-built base stations can be used at first, and all the base stations of China Mobile will be opened to the public around the Spring Festival next year, so that the construction cost of our base stations can be greatly reduced. This is the so-called "borrowing soldiers to fight" and "taking advantage". Self-built points also need to rent, and the rent is also high. How much money and energy have we saved by changing the rental house into a direct base station, and it is not easy to find a place in the city center now. Thanks to the establishment of the Tower Company, the biggest beneficiary of the establishment of the Tower Company is China Telecom, because our original 800M base station is just an opportunity today.
The total investment will increase next year, and the whole group will generally increase by 20%. The bulk of investment is not fixed-line and broadband, but mobile. China Mobile covers 300 cities this time, and actually it is estimated to be more. Our plan is to cover 100- 120 cities with thick coverage, and the rest cities with thin coverage, which is simple. Why? Because these 100 cities account for more than 75% of China Telecom's 3G traffic. China Mobile has the money to do that, while China Telecom has no money. If it does that, it will bring it down, so let's be sober on this issue. Including some cities in western Guangdong and northern Guangdong that I mentioned just now, we need to do a little thin coverage in the city center to mainly solve roaming. And if there is a little 4G, the quality of 3G will be greatly improved, because the traffic is diverted by 4G, and consumers can't figure out 3G and 4 G, so usability is the main thing. After all, our 3G has covered the whole country, and it has only been used for five years. Some areas have only been built for two or three years, so we should give full play to their benefits. In broadband, that is, FTTH transformation, we should "walk on two legs": next year, the group's investment will increase by 20%, and this fund should be used well, but only 20% increase is not enough, and we must ask the society for funds. Three years ago, I said that broadband should allow joint ventures between resident networks and society. Guangdong has done it, but it is not big enough. Last time I went to the countryside in Guangdong, the effect was very good. Why can't it be bigger? In the north, our broadband is a niche market. In a town, we find a local rich and powerful person to cooperate with, almost all of them belong to China Telecom, because his investment needs a return. In five years or 10, he will immediately become a customer of China Telecom, and our income will be gone in these five to 10 years, but the users and the market are all ours. If we took this road wider three years ago, why are we so passive today? But it's not too late. It is necessary to squeeze funds, do everything possible to speed up the progress of key cities such as Guangdong, Shenzhen, Dongguan, Foshan and Zhuhai, and build urban centers, including the urban-rural fringe. Now that the economy is not so good and the city has changed a little, it is time for large-scale investment. After investing, we must rebel communities one by one and win back users. We must have this determination to improve quality and protect users. Guangdong must fight this battle well next year. We have a pipeline, which can be done quickly. The difficulty is to switch lines door to door. Now we have a lot of experience in this field, so we must find ways to fight this tough battle well.
Third, intensive management to improve efficiency.
Our business is becoming more and more intensive, but I am worried, because in the past, we all focused on regional development, and there is no problem under the fixed network. However, if mobile and many new businesses rely entirely on provincial development, they will face many challenges.
At present, China Telecom ranks first among the three major operators in the declaration of user leapfrog, basically not on the Internet, but on marketing and package design. Due to excessive dispersion and many problems, mass incidents emerge one after another in China Telecom. A few years ago, China Unicom concentrated on IT, and the tariffs were basically unified nationwide. China Mobile's control is stronger than ours, so we have become the biggest problem among the three.
Now we have great ability to "divide", how to drill loopholes, how to cross goods on mobile phones, and how to get your settlement. This ability is sometimes far greater than the ability to develop users. Why is the network quality of China Mobile so good? Isn't this guaranteed by our own 3 1 provincial "underground pipeline"? Secretly provide it with 20G, 50G, 100G bandwidth, which is very cheap. The region made a small profit, but the big net was lost, and the essential problem was not intensive enough, so China Mobile still laughed all day that we were not a company at all.
Every time we start a business, we will sit down and discuss how to "cut the cake" before studying how the market develops. We must establish a distribution system and a clearing system, which makes it very complicated. In the end, no one cares whether the "cake" can grow bigger. We are flushed every day, and eventually the internal friction is all over. There is no telecom company in the world like us. For example, now "Yueme", I think now is the best time to launch it. We hope to gain a foothold through "Yueme", establish a brand and sell products by selling broadband, but we need the support of the whole network, because it is actually IPTV and OTT, and finally gradually transition to OTT. The cost of our network has been reduced, and it is cheaper for the whole network to buy program sources. Then each province only needs to support your local TV programs. But I am very worried that this product can't be made, not because of the product itself, but because every province in our country feels that its original platform is so good, and the original income belongs to me. In the end, I beat my best product to pieces.
If China Telecom can't unite as one now and Qi Xin works together, it will be carved up by others. Now Baidu, Tencent and Ali are all laying out "clouds", especially Baidu and Ali. Their clouds are basically divided into two categories: one is high-quality customers facing central cities, which need to achieve short-term quality assurance, called "cold database", which is disaster recovery backup, and customers can build it where they need it; In addition, all data with low latency requirements are placed in a relatively remote and low-cost center. Basically, it is a national chess game, so its competitiveness far exceeds that of China Telecom. When our original competitors were China Mobile and China Unicom, the level of the three companies was almost the same, and there was no problem. Today, the situation is different, users are losing in groups, and we don't realize it ourselves. The provinces are still emphasizing its importance, and there is no chess game in the whole network. Therefore, we must unite. Theoretically speaking, our competitive advantage is higher than that of our competitors, and our thinking is not backward. Ali's cloud center is "8+2", and now we are "6+2". Add two more cities, and we will be just like him, but if we don't concentrate, we will die.
Provinces can make suggestions on which products are not good and improve their headquarters. I am also worried that our "officials" in Beijing are too far away from the market, so we have set up our bases in all provinces. Guangdong should take the lead in setting an example and concentrate on holding a group. The province should concentrate on solving its own problems first. Some businesses must be resolutely put down, and some businesses that need to be concentrated must be concentrated, especially innovation and Internet business. The income of the group headquarters is finally distributed to the provinces. For example, the headquarters will strive for policies and settle accounts with China Mobile. Isn't the final income all in the provinces? There are 40 cities in 4G and 4 cities in Guangdong, accounting for 10%. Some provinces are not convinced, so I say that the pilot cities of 4G depend on the traffic of 3G. So I hope everyone will emancipate their minds and make China Telecom bigger, especially the Internet business.
I have repeatedly talked about Ali, Baidu and Tencent. If they had "Ali in a province" and "Baidu in a province" like us, they would have died long ago. In the internet age, what people can do, we have to emphasize particularity and meaningless. Therefore, everyone has opinions and questions to ask, and we can improve them together, but we should not form obstacles. Isn't it scattered that Tmall goes to so many stores in China Telecom? Like a potato in a sack, it looks like a complete sack. As soon as this hole is released, it will be scattered everywhere, and no one can care much.
Generally speaking, the beginning of the year to August is a difficult period for Guangdong's business development, and a good momentum appeared in September. Generally speaking, once there is a good momentum, it will keep rising steadily. I hope this good momentum will get better and better under the leadership of the provincial company team and the joint efforts of all cadres and workers in Guangdong.
Thank you!