China Tower – Big and Bigger

China Tower (HKSE: 0078) is already the biggest tower company in the world. And it keeps getting bigger. In the 12 months, from June 30, 2021, through June 30, 2022, China Tower added 14,000 towers, bringing its total to 2,049,000. On top of that base, the company accelerated 5G network deployments. The company says its 5G network construction through the first half of 2022 was moderately ahead of schedule, reaching 1,544,000 cell sites. These 5G deployments supported network densification in heavily populated urban areas and expanded coverage in townships and rural areas.

China Tower points out that the creation of 5G applications among its telecom service providers (TSP) tenants has entered the “fast lane.” In response, the company is accelerating 5G network deployments. By the end of 2022, it expects the cumulative number of 5G sites to exceed 2 million. 

It claims that at the end of 1H22, 97 percent of 5G traffic can be handled over existing shared sites. Furthermore, 5G traffic accounted for 84 percent of China Tower’s incremental organic service revenue growth.

The company is adhering to its “One Core and Two Wings” strategy. One Core is its primary TSP tower business and its neutral host distributed antenna system (DAS) business. Two Wings comprises two businesses: Smart Tower and Energy. Smart Tower involves video and IoT sensor monitoring in a variety of industrial and government applications; Energy handles an electric vehicle battery exchange program and offers power backup and energy efficiency solutions to a number of vertical markets.

Consolidated revenues for the first six months of 2022 were $6.7 billion, up nearly 7 percent over $6.3 billion in 1H21. TSPs are its mainstay revenue source, accounting for 91 percent of the total and growing at 4 percent year-over-year. The Smart Tower and Energy businesses, however, grew much faster, up 46 percent in the same period, reaching nearly $600 million. Consolidated EBITDA was $4.8 billion, up nearly 3 percent YoY while free cash flow grew 60 percent to $3.3 billion.

China Tower’s primary business supports the country’s three TSPs – China Mobile, China Telecom and China Unicom – that together serve over 1.6 billion subscribers. Of that total, an estimated 900 million subscribers are 5G users. Newcomer China Broadcast Network (China Broadnet) is the fourth national carrier but so far garners less than 3 percent of the market.

At the end of 1H22, China Tower had 3.3 million tenants with an average of 1.62 tenants per tower ratio. The company is leveraging its shared site resources model to rapidly extend 5G network coverage from cities to villages and towns. Moreover, it has developed products such as a simplified power supply and centralized RAN shelters at towers to meet diverse customer needs efficiently.

China Tower’s DAS business is accelerating in response to TSP demand for expanded 5G coverage inside buildings. Through 1H22, the company added over 10 billion square feet of indoor DAS coverage, bringing the total to nearly 65 billion sq ft. Moreover, it extended outdoor DAS coverage, adding close to 450 miles each, in subways and high-speed railways tunnels.

The Smart Tower business enables “social digital governance” in key areas such as environmental protection, agriculture, digital village, transportation, water resources, emergency response, land, and forestry. For instance, the company monitored over 4,700 key watersheds from 11,000 sites to solve issues related to water resource governance. From another 8,000 sites, it enabled the “digital village” for 2,892 towns and villages, solving issues on drinking water safety, garbage classification, and aquacultural sewage discharge in rural areas. At the end of 1H22, 209,000 existing tower sites were utilized for the various Smart Tower applications.

The Energy Business, which grew over 62 percent YoY, is the largest light electric vehicle battery exchange service provider in China. In addition, China Tower provides backup power and energy savings solutions and services to key verticals including finance, communications, healthcare, petrochemical, government, and education.

By John Celentano, Inside Towers Business Editor

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