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China Unicom

China Unicom sees recovery on track as quarterly profit balloons

PUBLISHED : Friday, 21 April, 2017, 9:09pm
UPDATED : Friday, 21 April, 2017, 10:49pm

China Unicom, the world’s sixth-largest mobile network operator by subscribers, put investors on notice that its recovery is on track after posting on Friday a 79.3 per cent jump in first-quarter net profit.

The company reported after the market closed a net profit of 862 million yuan (US$125.2 million), up from 480 million yuan in the same period last year and rebounding from a 963 million yuan loss in the quarter to December.

That beat the 782.5 million yuan consensus net profit estimate of analysts polled by Bloomberg.

Unicom attributed that growth to a sharpened focus on its 4G business, as the operator accelerated the shift of more 2G and 3G subscribers to its mobile broadband service.

It counted 266.3 million total mobile subscribers as of March 31, of which 122.7 million are 4G network users.

Earnings before interest, tax, depreciation and amortisation (ebitda) – a standard measure of business profitability – rose 5 per cent last quarter to 20.9 billion yuan, from 19.9 billion yuan a year earlier, in line with analysts’ estimates.

China Unicom tipped to become more market-driven under ‘mixed-ownership’ scheme

Total revenue, however, slipped about 2 per cent to 69 billion yuan from 70.3 billion yuan in the previous year, on a decline in sales of telecommunications products and other service revenue.

Its mobile and fixed-line service businesses appeared resilient as these grew 2.8 per cent and 2.5 per cent respectively.

Unicom also reported a decrease in selling and marketing expenses, as well as lower network, operation and support expenses.

“Investors have been waiting for the first quarter results to see if [Unicom’s] recovery is broad-based and sustainable, or just window-dressing – the result of a temporary squeezing of costs,” Bernstein senior analyst Chris Lane said on Friday.

“Our impression is that the recovery is real, and the company is gaining momentum.”

China’s telecom giants warn of earnings impact from tariff cuts, in compliance with Beijing directive

Lane expected further growth catalysts for Unicom this year to come from the central government’s mixed-ownership reform and the initial public offering of China Tower Corp, the mainland telecommunications industry’s infrastructure-sharing joint venture.

Unicom said earlier this month that its Shanghai-listed parent, China United Network Communications, plans to take on board a strategic private-sector investor under Beijing’s ambitious programme to reform state-owned enterprises.

The optimism over Unicom’s newfound growth trajectory is in stark contrast to the projection for China Mobile, the world’s largest wireless network operator.

Analysts said China Mobile will likely face slowing growth this year after it reported on Thursday lower-than-expected earnings in the first quarter.

“Given that the first quarter is usually a better quarter [for mainland telecommunications operators] and ... [further] tariff cuts should happen in the fourth quarter at the latest, we expect China Mobile’s growth rates to deteriorate in the next few quarters,” Jefferies equity analyst Edison Lee said on Thursday.