China Unicom

Improper practices found at Unicom

PUBLISHED : Saturday, 21 May, 2011, 12:00am
UPDATED : Saturday, 21 May, 2011, 12:00am


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A nationwide audit of China Unicom (Hong Kong) and its parent company has uncovered 'certain improper measures and practices' in the operations of the mainland's second-biggest mobile network.

The findings were announced yesterday by the National Audit Office, which conducted a review on the 2009 financial information of parent company China United Network Communications Group, Hong Kong-listed Unicom and seven other subsidiaries.

The office reported that there were accounting and management issues, project management problems related to suppliers' bidding process, and internal management problems during the first full year of Unicom's operations after Beijing restructured the telecommunications industry in 2008.

Unicom, the exclusive carrier-partner of Apple for its iPhone on the mainland, said those matters have been addressed with what it described as 'rectification measures', according to a filing with the Hong Kong stock exchange yesterday.

At the end of 2009, the audit office said the Unicom group of companies wrestled with the issuance of improper invoices by certain marketing and distribution service providers.

It also found a misallocation of certain expenses between the group and the Hong Kong-listed operator, which resulted in the accrual of expenses attributable to the subsidiary in the accounts of the parent firm.

Unicom in Hong Kong said the company had initiated a group-wide examination to verify invoices, conducted training and compiled a blacklist of service providers.

'The company has verified that the services [questioned in the audit] had actually been provided and requested such service providers to reissue proper invoices,' Unicom said.

On the misallocation of expenses between the group and Unicom, the company said it updated the arrangements for related-party transactions last year.

The audit office found that in certain 'materials procurement projects', the group merely adopted a competitive negotiation with suppliers that did not lead to an auction process.

Unicom yesterday said it had refined its administration of bidding for construction contracts and equipment buying, as well as documentation procedures.

The audit also found that operations management and accounting procedures were not strictly enforced.

These included reports for certain construction-in-progress projects not being prepared on time and lack of timely accounting for certain obsolete and impaired assets.

Unicom said the costs of the late reporting and the related provision for depreciation 'had no significant impact on the financial statements of the company'.

Global professional services firm PricewaterhouseCoopers, the official auditor of Unicom, had signed off on the operator's financial results.

Asked about the report yesterday, a spokesman for PricewaterhouseCoopers in Hong Kong said: 'We do not comment on our clients.'