China Tower Corporation Limited, the largest tower company globally, today announced its Q2 2021 earnings (2021 Interim Results) and provided updates on its operations and key business drivers. Notably, China Tower is a state-owned enterprise (SOE), primarily owned by China’s three largest wireless carriers: China Mobile, China Unicom, and China Telecom.
Financial Performance in Q2 2021 – China Tower
In Q2 2021, China Tower reported total revenue of RMB21.5bn ($3.3bn), a 1.8% increase quarter-over-quarter, and EBITDA of RMB15.6bn ($2.4bn), a 0.5% increase quarter-over-quarter. Therefore, the company’s EBITDA margin was 72.6% in Q2 2021, an ~90 bps decline quarter-over-quarter.
Tower Revenue
For Q2 2021, China Tower generated tower revenue of RMB18.9bn ($2.9bn), a 0.3% increase quarter-over-quarter.
Distributed Antenna System (DAS) Revenue
In Q2 2021, China Tower produced distributed antenna system (DAS) revenue of RMB1.1bn ($170m), a 12% increase from Q1 earnings.
Operational Performance in Q2 2021 – China Tower
As of June 30, 2021, China Tower had 2.0 million tower sites in China with a tenancy ratio of 1.68x. Indeed, this equates to 3.4 million tenants with equipment on the company’s towers.
During the quarter ended June 30, 2021, the company added 8.0k towers to its portfolio. At the same time, net tenancy additions were 26k during the quarter.
China Tower’s unit economics for its towers, yield a revenue per tower site of RMB19.5k (~$3.0k) annually.
Key Business Drivers
China’s largest wireless carriers have indicated they will roll-out, via China Tower, 640k 5G base transceiver stations (BTS) in 2021. Specifically, this includes deployments in the following radio frequencies:
- 700 MHz: 200k base transceiver stations (BTS) from China Mobile and China Broadcasting Network
- 2.1 GHz and 3.5 GHz: 320k base transceiver stations (BTS) from China Unicom and China Telecom
- 2.6 GHz: 120k base transceiver stations (BTS) from China Mobile
Towers
China Tower’s slow pace of tower construction and tenant lease-up on its towers (see above) reflects a more cautious approach to 5G digital infrastructure spending by China’s wireless carriers. Indeed, these wireless carriers have struggled to monetize a higher 5G ARPU, through their own wireless customers.
In turn, China’s wireless carriers have been deploying base transceiver station (BTS) equipment on their existing tower sites, as opposed to new sites. Additionally, these wireless carriers are decommissioning certain sites that service legacy network generations (i.e., 2G and 3G).
Overall, China Tower is suffering from a lack of 5G-related network densification, which would drive demand for the company’s towers. In contrast, China’s wireless carriers are seeking opportunities to reduce their capital expenditures and pursue network sharing arrangements.
Distributed Antenna System (DAS)
China Tower’s distributed antenna system (DAS) business has shown recent strength, posting 10%+ quarter-over-quarter growth for the past two periods. To this end, China Tower Corporation is experiencing demand for coverage in indoor environments such as high-speed railway tunnels, subways, airports, office buildings, and other large venues.
