Why Do U.S. Wireless Carriers Invest More Per Subscriber Than Chinese Carriers?

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Wireless carriers in the United States spend about 2.5x as much in capital expenditures per subscriber compared to their Chinese counterparts. For instance, Verizon (NYSE:VZ), the largest U.S. carrier by revenue, spent about $104 in capex per subscriber in 2015, while China’s largest operator China Mobile (NYSE:CHL) spent about $37. Below we take a look at some of the primary reasons for the difference.

Capex_per_sub_1

  • U.S. carriers generally deploy the latest technologies well before their Chinese peers, translating into comparatively higher capex spending. For instance, Verizon began rolling out 4G LTE in late 2010, while China Mobile started its 4G roll-out in 2014. U.S. carriers are also on the forefront of deploying the next generation 5G technology, with plans for commercial operations by the end of this decade.
  • U.S. customers consume significantly higher amounts of mobile data compared to their Chinese peers, calling for higher spectrum spending or greater spectrum reuse, increasing capex. According to Cisco, in 2015 mobile data traffic per mobile connection stood at about 267 MB in China, roughly 25% of the average U.S. consumption.
  • China’s population density is significantly higher than the United States, implying that each unit of mobile infrastructure such as towers can be used to serve more subscribers. The number of people per square kilometer of land in the U.S. stands at about 35 versus about 145 in China, according to the World Bank.
  • Mobile ARPU in the U.S. is also much higher, at about $46 per subscriber compared to roughly $10 in China, allowing carriers to invest greater amounts on network upgrades per subscriber.

Notes:

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1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for AT&TVerizonChina MobileChina Unicom 

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