China Tower, based in Beijing, continues its large-scale growth at a very fast pace. Through the first half of 2021, the company reported that its base of towers grew to 2.035 million, adding a net 12,000 towers to the 2.023 million at the end of 2020.
Perhaps more significantly, in that same six-month period, the company claims it installed approximately 256,000 5G cell sites throughout the country. As of June 30, the total 5G installed base is an estimated 1,022,000 cell sites.
China Tower reported U.S.$ 6.6 billion* (CNY42.7 billion) in operating revenues for 1H21, up over 7 percent from $6.1 billion in the same period in 2020. EBITDA came in at $4.8 billion while operating cash flow was $3.7 billion and free cash flow was $2.1 billion.
The company says that through the first half of 2021, its new construction and upgrade activities were focused on its “One Core and Two Wings” strategy.
One Core refers to its telecommunication service provider (TSP) business that supports the country’s three state-owned mobile networks operators – China Telecom, China Mobile and China Unicom. All three MNOs are major shareholders in China Tower. TSP consists of two segments – the tower business, and the distributed antenna systems (DAS) business that together, accounted for $6.1 billion or 93 percent of 1H21 total operating revenues.
The tower business drives the lion’s share of China Tower’s revenues, accounting for $5.8 billion, up nearly four percent on a year-over-year basis. As it grew its tower site base to 2.035 million at the end of 1H21, the company also indicated that it gained 53,000 new TSP tenants bringing the total to over 3.2 million, increasing the TSP tenancy ratio to 1.59 from 1.57 at the end of 2020.
The DAS business cumulatively covered buildings with a total area of 4.41 billion square meters, up by 41 percent YoY. DAS also covered a total of 14,431 kilometers of high-speed railway tunnels and subways, an increase of almost 32 percent from 1H20. DAS business revenue accounted for $322 million, representing a YoY growth of over 21 percent.
China Tower says it has implemented “multiple measures to facilitate large-scale 5G network construction.” A key to its rapid rollout is a standardized approach to coordinating resources with standard practices and supporting policies. It helps that its three MNOs customers use the same radio equipment and share many tower assets.
The company points out that it has improved its resource utilization efficiency, making full use of existing towers and ancillary facilities for shelters while leveraging “social resources” such as street lights and electric utility poles.
At the same time, China Tower is applying innovative products including low-cost towers and ancillary power supplies, and is promoting low-cost sharing solutions of 5G passive DAS that can access all frequency bands.
The operational and management efficiencies that the company is achieving in its network construction are paying off with “this supported scale development of 5G networks” increasing the revenue contribution from 5G.
The incremental revenue contributed to TSP’s business by 5G has grown dramatically from 23 percent of total revenues at the end of 1H20 to 40 percent at the end of 2020, and was 63 percent at the end of 1H21.
These efficient operations reduced China Tower’s aggregate 1H21 capital expenditures to $1.6 billion, down nearly 28 percent compared to 1H20. With the company’s historical spending pattern showing higher capex levels in the second half of the year, expect 2H21 capex levels to rise.
At just six percent of China Tower’s total 1H21 revenues, its Two Wings operations are the fastest growing. The Two Wings business, comprising the trans-sector site application and information (TSSAI) business, and the energy business generated $423 million in 1H21 revenues, up over 73 percent from $244 million in 1H20.
TSSAI’s “Tower Monitoring” video surveillance business serves a wide range of customers across sectors relating to the national economy and people’s livelihoods including environmental remediation, disaster relief, eco-conservation and village governance.”
The energy business is capturing opportunities related to a low-carbon economy by focusing on expanding the scale of its operations and improved management approach in its core business segments of electric vehicle battery exchange and power backup for smart energy applications.
At the end of 1H21, the company had cumulatively provided around 460,000 users with battery exchange services, up from 160,000 compared with the end of 2020, making it the largest supplier of battery exchange services for light electric vehicles in China. It also built a total of 17,000 power backup sites during 1H21, a net increase of 5,000 compared with the end of 2020.
* All funds shown in U.S. dollars
By John Celentano, Inside Towers Business Editor