China Mobile releases 2023/2024 tender, finally

According to the announcement, the expected volume in sheath-km is around 3.4M which implies an average fibre count of 31.9. The maximum bid value allowed to submit is set at RMB7.6 bn excluding VAT. It is still too early to predict what cable and implied bare fibre prices will be settled on in the final tender awards as this will depend heavily on just how competitive the bidding process will be this year, after the Chinese domestic market experienced a 7.7% y/y contraction in optical cable consumption in 2023 Q1, partially due to the delay of this tender. The encouraging news is we notice a 2.2% increase in the maximum bid value per F-km, compared with the previous tender. As a reminder, the implied bare fibre prices in the 2021/2022 tender were settled around $3.9 /F-km excluding VAT.

China Mobile has advised this tender will satisfy purchase demand for a period of one year. However, we need to be aware this is not guaranteed as the last several tenders from China Mobile have seemingly satisfied demand well beyond the 12-month period. In fact, the last tender has lasted for more than one and half years before the announcement of this new tender, despite some top-up volumes being added in between. Nevertheless, some market participants suggest to CRU that this tender should last markedly shorter than the previous tender.

The announcement outlines the expected bidding process which will be based on a quota system. The number of successful bidders is expected to be either 13 or 14 companies, with the largest possible distributor share reaching 19.36% of the total tender volume, slightly lower than the 21.57% outlined in the last tender. However, CRU noted only 6.83% or 6.25%, depending on if it ends with 13 or 14 successful bidders, will be allocated to the 5th place position. This is significantly lower than the allocation share of the 4th place position at 11.61%. This is also notably lower than the allocation share of the 5th place position at 8.14% in the 2021/2022 tender. The reduced allocation share for the 5th place is largely in line with CRU’s expectation considering some subtle changes that have occurred in the Chinese fibre optic industry over the past year. Though this may still trigger higher competition on prices somewhat amongst the ‘Big-5’ Chinese producers as none of them will easily to accept a noticeably lower winning share in this tender compared with their peers.

CRU will be tracking developments around China Mobile and China Telecom tenders closely over the coming weeks and months and will update subscribers appropriately.