China Unicom targets accelerated 4G push after reporting 2015 profit fell 12pc to HK$12.6b

PUBLISHED : Wednesday, 16 March, 2016, 10:01pm
UPDATED : Thursday, 17 March, 2016, 10:07am

China Unicom, the country’s second-largest wireless network operator, is gearing up to push an aggressive turnaround plan after reporting a widely expected decline in earnings and subscribers last year.

“The new [financial] year marks the beginning of the all-around implementation of our focus strategies,” chairman and chief executive Wang Xiaochu said at a press conference on Wednesday.

Unicom’s laundry list of priorities included accelerating its 4G mobile network roll-out across the country, reshaping its brand image, improving customer retention efforts, and helping upgrade more of its 2G and 3G users to 4G.

“The company is facing difficulties and challenges, as well as numerous opportunities and growth potential,” Wang said.

Another issue Unicom must publicly deal with is the government’s ongoing investigation into Chang Xiaobing, the company’s previous chairman and chief executive, over alleged corruption during his tenure.

“We believe there is a credible recovery story [for Unicom], based on long-term network investment and improving value for customers. However, there is no such thing as a quick fix,” Bernstein senior analyst Chris Lane said in a report.

In its filing with the Hong Kong stock exchange, Unicom reported a 12 per cent decrease in 2015 net profit to 10.56 billion yuan (HK$12.57 billion), down from 12.05 billion yuan in 2014, as operating expenses rose and service revenue fell amid increased competition against China Mobile and China Telecom.

Total revenue decreased 2.68 per cent to 277.05 billion yuan, from 284.68 billion yuan in 2014, as mobile service income fell 8 per cent year on year to 142.62 billion yuan.

Unicom had 286.66 million mobile subscribers as of December 31, compared with 299.09 million at the end of 2014. The company had 44.16 million 4G users at the end of last year.

“One of Unicom’s core problems over the past year is that they have been losing high-value customers and replacing them with few lower-value customers,” Lane said.

“For Unicom to turn around, they need to start growing their share of the high-value

4G base. This requires monthly 4G net additions well above their existing total subscriber share of

20 per cent [in mainland China].”

China Mobile, the world’s largest wireless network operator, had 826.24 million subscribers at the of last year, including 312.28 million 4G users.

Wang is betting that Unicom will be able to catch up with its competitors in terms of 4G network coverage through the mainland telecommunications industry’s ambitious infrastructure-sharing joint venture, China Tower Corp.

China Mobile, Unicom and China Telecom in October agreed to sell and transfer assets worth a combined 214 billion yuan in that venture.

“The disposal of assets will facilitate the sharing of telecommunications towers among operators, thus promoting a quick and efficient 4G roll-out,” Wang said.

There were already 164,000 towers delivered by the venture for shared infrastructure development last year, according to Unicom’s estimates.

In January, Unicom and China Telecom also formed a strategic alliance that included joint regional 4G infrastructure build out and establishment of a proposed national smartphone standard.

Wang pointed out that Unicom’s total capital spending this year would reach 75 billion yuan, down from 133.9 billion yuan last year, on the back of those two endeavours and its sharpened focus on 4G services.

In regards to the corruption investigation involving Chang, Unicom was continuing to cooperate with authorities, Wang said. The probe is being conducted by the Central Commission for Discipline Inspection, which is the Communist Party’s anti-graft body.

Unicom’s Hong Kong-listed shares slid 0.87 per cent to close at HK$9.15 on Wednesday.