In the first quarter of 2017, the Company's operation progressed steadily as planned. Service revenue amounted to RMB 61,426 million, up by 2.4% year-on-year and 6.6% quarter-on-quarter. The Company fully promoted the transformation of its marketing model to accelerate scale and profitable development. Selling and marketing expenses were down by 4.2% year-on-year. Network, operation and support expenses decreased by 0.4% year-on-year. EBITDA amounted to RMB 20,975 million, up by 5.0% year-on-year and 18.2% quarter-on-quarter. EBITDA as a percentage of service revenue was 34.1%. In the first quarter of 2017, the profit attributable to the equity shareholders of the Company amounted to RMB 862 million, up by 79.3% year-on-year and showing significant improvement from the loss attributable to the equity shareholders of the Company of RMB 963 million in the fourth quarter of last year.
In the first quarter of 2017, the Company focused on 4G business and stepped up the transformation of its marketing model. It accelerated migration of 2G/3G subscribers to 4G. Meanwhile, the Company also actively propelled the 2I2C business by collaborating with Internet companies on targeted marketing in order to expand the reach of customer touch points, strengthen market segmentation and data traffic operation, differentiate its products and development models, and drive 4G business development and revenue growth with low incremental costs. In the first quarter of 2017, the Company's mobile billing subscribers registered a net addition of 2.443 million, reaching a total of 266.265 million. Mobile billing subscriber ARPU was RMB 46.7, up slightly as compared to the full-year average of last year. Within that, 4G subscribers registered a net addition of 18.175 million, reaching a total of 122.726 million. 4G subscriber ARPU was RMB 73.9. Mobile service revenue amounted to RMB 37,197 million, up by 2.8% year-on-year and 5.1% quarter-on-quarter.
In the first quarter of 2017, the Company's fixed-line service maintained steady growth. Fast growth in innovative businesses like IDC/cloud computing, ICT, video and IoT, etc. effectively offset the decline in fixed-line voice revenue. Faced with fierce market competition in fixed-line broadband, the Company actively promoted subscriber consumption upgrade and integrated development leveraging high-bandwidth products and video applications. The number of fixed-line broadband subscribers reached 76.589 million, representing a net addition of 1.353 million as compared to the end of last year, but the fixed-line broadband access ARPU decreased compared with the same period of last year. Fixed-line service revenue was RMB 23,813 million, up by 2.5% year-on-year and 7.5% quarter-on-quarter.
In 2016, the Company actively leveraged its advantages in fibre network and informatisation with the focus on industrial Internet and platform-based services and fully promoted product development, platform support, marketing services and other core capabilities. Besides, it propelled new breakthroughs in IDC and cloud computing, ICT, IoT, Big Data, IPTV, industry applications, Internet finance and other innovative services. In 2016, the Company's IDC and cloud computing revenue reached RMB9.45 billion, up 33.7% year-on-year. ICT revenue reached RMB5.94 billion, up 37.0% year-on-year, enjoying the leading position in educational informatisation while advancing scale development in healthcare informatisation. IPTV revenue reached RMB1.41 billion, up 68.1% year-on-year.
The Company initiated 2I2C marketing model in the fourth quarter of 2016 and began to collaborate with Internet companies on innovative targeted marketing. Through sub-dividing market segments and strengthening data traffic operation, differentiated products and development models were established with a view to achieving win-win scenarios with both subscribers and partners. The innovative business model of 2I2C business not only enables the Company to develop new touch points for customer acquisition and lift the capabilities to drive 4G subscriber and revenue growth at low incremental cost, but also continuously enhances customer value through smart marketing and convenient promotion of consumption upgrade.
In 2016, through implementing precise investment and actively promoting cooperation and resource sharing within and beyond the industry, the Company attained substantial improvement in the network capability while capital expenditure decreased to RMB72.11 billion, down by 46.1% year-on-year. The Company recorded a net increase of 337,000 4G base stations to a total of 736,000, with coverage, speed and signal quality of the 4G network in key regions on par with the industry. As a result of the steady progress in the speed upgrade in fixed-line broadband, ten provinces in Northern China achieved "all fibre networks", in which city areas were basically equipped with 100Mbps access capability.

In 2017, the Company will leverage focus and cooperation, actively increase network utilisation and strictly control investment in low utilisation regions to enhance returns. The Company's CAPEX budget is RMB45.0 billion for 2017, down by 38% year-on-year, while reserving capital for 5G development.
In 2016, the comprehensive and strategic cooperation with China Telecom was smoothly progressing. During the year, a total of 70,000 4G base stations and approximately 16,000 km transmission fibre cable were co-built and co-shared. The Company also jointly promoted 6-mode "All Network Access" handsets together with China Telecom and standardised the 4K smart set-top box and broadband services. Through the cooperation, savings of approximately RMB3.3 billion in CAPEX and RMB0.35 billion in operating expenses were achieved. Looking ahead, the two parties will further open existing base station resources and strengthen the sharing, while enhancing cooperation in operational maintenance and innovative services to reap new outcomes.
Taking into consideration the Company's profitability, debt, cash flow level and capital requirements for its future development, the Board has resolved not to pay a dividend for the year 2016. The Company will strive to enhance its profits while paving the way for paying a dividend for the year 2017.
In 2017, the Company will seize opportunities, deepen the implementation of Focus Strategy, and persistently uphold scale and economical development as the centre, thus pushing the Company to step onto the healthy development path. The priorities include:

  • To focus on the innovative transformation of operating model, and speed up scale and efficient business development.
  • To scale up the 2I2C business model, drive the upgrade of 2G to 4G, and unleash data value to accelerate 4G business development.
  • To adhere to video-oriented integrated operation, and strengthen our service edges to achieve efficient development in broadband services.
  • To focus on platform-based businesses and industrial Internet, and strengthen our core capabilities in innovative businesses so as to nurture revenue growth drivers.
  • To enhance fundamental management, deepen reform in various areas, and fully raise operating efficiency and service support capability.
The Company's ultimate parent company, China United Network Communications Group Company Limited, plans to leverage China United Network Communications Limited, the controlling shareholder of the Company (the "Unicom A Share Company"), as a platform for the mixed ownership reform and is contemplating and progressing significant matters relating to the mixed ownership reform. Unicom A Share Company plans to introduce strategic investors through such means as private placement of its shares and is actively advancing endeavours related to such significant matters, including, but not limited to, liaison and consultation with relevant government departments, proactively seeking related approval and further preparation and deliberation on the implementation plan.

With regard to the progress of the above matters, the Company will timely perform its information disclosure obligation strictly in accordance with the requirements of the listing rules and other related laws and regulations.
Last updated: 04 May 2017