China Tower (OTC: CHWRF) is the biggest tower company in the world. The company operates at a size and scale like no other. At the end of 1H20, China Tower surpassed 2 million tower sites in service, an increase of 3 percent or 61,000 tower sites from 1.95 million at the end of 1H19.
Since the beginning of 2020, China Tower added 21,000 tower sites. That run rate is equivalent to adding the U.S. tower operations of American Tower (NYSE: AMT) or Crown Castle (NYSE: CCI) every year.
China Tower serves mainly three telecommunications service providers, China Mobile, China Telecom and China Unicom, that together have nearly 1.6 billion subscribers. Minor customers include local government authorities and public institutions, state-owned companies, and other groups.
The company added 231,000 tenants on a year-to-year basis. TSPs accounted for 3.1 million tenants in 1H20, nearly 7 percent over 2.9 million at 1H19. Overall tenants per tower site grew to 1.64, up 4 percent from 1.58 at 1H19.
Operating revenue for 1H20 reached US$6 billion, nearly 5 percent over $5.7 billion in 1H19. EBITDA came in at $4.4 billion, up 4.6 percent over $4.2 billion in the previous year.
Capital expenditures for 1H20 were $2.2 billion, a 61 percent jump from $1.3 billion spent in 1H19. Notably, capital intensity of 36 percent in 1H20 shows the remarkably high level of network expansion underway.
China Tower’s “One Core and Two Wings” strategy is accelerating 5G deployments nationwide.
One Core includes the tower business (tower construction and operation, site space leasing, maintenance, and power services), and the indoor distributed antenna systems (DAS) business. One Core accounted for 96 percent of operating revenues in 1H20.
Two Wings augments China Tower’s site leasing model with value-added services. Two Wings encompasses dual non-tower businesses: the trans-sector site application and information services (TSSAI) business, and the energy operations business.
TSSAI includes leasing of shared non-tower sites, video surveillance, data monitoring and mobile edge computing. Energy operations include power backup and generation, and electric vehicle battery charging and exchange.
Although only 4 percent of China Tower’s 1H20 revenues, Two Wings is the fastest growing segment, rising 87 percent over the 1H19 level.
The company is working closely with TSPs for rapid 5G deployments by focusing on Tier 1 cities.
Shanghai, Beijing, Tianjin, Guangzhou and Shenzhen, urban areas with over 10 million people each, together tally 67 million. Fifteen cities of around 5 million each account for another 105 million people. China has an estimated 160 cities with populations of at least 1 million people.
Through 1H20, the company overcame COVID-19 impacts and surged ahead with 5G deployments, running ahead of schedule. Coordinating closely with TSPs, their equipment vendors and municipalities, China Tower developed innovations to minimize 5G supply chain and construction difficulties.
Consequently, the company says it built 215,000 5G sites in 1H20 while completing 108 percent of deliverable 5G construction demand.
Concurrently, it leveraged its scale of operation to launch low cost 5G passive DAS sharing solutions while giving TSPs access to all frequency bands.
In 1H20, China Tower expanded in-building DAS coverage by 5.9 million sq. ft. to 33.6 million sq. ft. The company also extended its 5G wireless reach underground with DAS that now covers 3,000 miles of subways and 3,800 miles of high-speed railway tunnels.
The company’s infrastructure sharing approach involves several aspects. First, China Tower has government policy support for 5G construction. With that, it is accessing “social” resources such as utility and light poles, and rooftops. Moreover, it has cooperation from property developers to access their facilities. Certainly, the company’s scale of operation gives it a low construction cost advantage by utilizing social resources in urban areas.
Second, China Tower’s sharing model promotes two-way conversion of telecommunication towers and social poles. This means extending the sharing concept from traditional sharing of towers, shelters, and DAS to integrated sharing of transmission, power, and other network resources.
Third, the company believes that its innovative construction plan to enhance the sharing capacity of existing tower sites will accelerate 5G construction with low costs, differentiated DAS and robust power supply.
Through year-end 2020, China Tower expects its Core business to maintain “steady and sustainable growth” with “fast growth” in its Two Wings business while increasing profits.
By John Celentano, Inside Towers Business Editor