In the first three quarters of 2016, the Company strived to mitigate its underlying shortcomings and saw the emergence of positive business momentum. The Company's service revenue was RMB 182,752 million, up by 1.7% year-on-year, which showed continuous improvement from the 1.4% increase year-on-year in the first half of this year. EBITDA for the period was RMB 61,749 million, down by 16.8% year-on-year. EBITDA as a percentage of service revenue was 33.8%. The profit attributable to the equity shareholders of the Company amounted to RMB 1,588 million, down by 80.6% year-on-year, but it showed significant improvement from the loss attributable to the equity shareholders of the Company (excluding the gain on disposal of tower assets) of approximately RMB 3,363 million in the second half of last year.
In the first three quarters of 2016, the Company's mobile service achieved initial success in overcoming operational challenges. Mobile billing subscribers reached 262.074 million, registering a net addition of 9.757 million during the period. Mobile billing subscriber ARPU was RMB 47.0, up slightly as compared to the full-year average of last year. Within that, the number of 4G subscribers reached 88.906 million, representing a net addition of 44.750 million. For September alone, the net addition of 4G subscribers amounted to 6.054 million. 4G subscriber ARPU was RMB 79.3. Mobile service revenue turned around its decline and reached RMB 109,638 million, up by 0.1% year-on-year, which showed ongoing improvement from the decline of 0.6% year-on-year in the first half of this year.
In the first three quarters of 2016, the overall fixed-line service maintained solid development. Growth services like IDC, ICT, VAS and integrated information services continued their robust growth momentum, which effectively offset the impact of the decline in fixed-line voice services. Faced with fierce market competition in the fixed-line broadband, the Company proactively strengthened and enhanced its differentiated competitive edge of “quality plus service” in the broadband service. The number of fixed-line broadband subscribers reached 75.050 million, representing a net addition of 2.720 million during the period, but the fixed-line broadband access ARPU decreased compared with the full-year average of last year. Fixed-line service revenue was RMB 71,908 million, up by 3.9% year-on-year.
Leveraging our own resources and strengths and through “Focus Strategy” and cooperation, the Company swiftly enhanced its network capabilities despite decline of capital expenditure by 39% year-on-year to RMB18.10 billion in the first half of the year. Net increase of 4G base stations was 189,000, with the total reaching 588,000. As a result of an accelerated push in fibre broadband network upgrade, eight provinces in Northern China achieved “all fibre network”, and city areas basically have access capability to 100Mbps connection.

Full-year CAPEX for 2016 is estimated to be RMB75 billion.
In the first half of 2016, the Company pushed forward comprehensive and strategic cooperation with China Telecom to facilitate resources sharing within the industry, promote cost-effectiveness, efficiency and rapid improvement in the network capability. The two companies formulated projects for sharing around 60,000 4G base stations and around 14,500km transmission fibre cables. In the meantime, the Company also promoted 6-mode all-access terminals together with China Telecom and unified the standards for 4K smart set-top box and broadband service to further enhance service quality.
  • Disposal gain: A gain on disposal before taxes of RMB 9.25 billion was recognised in 2015
  • Accelerating network deployment with Less CAPEX: Actively take advantage of the towers and cell sites of the Tower Company
  • Tower sharing discount: With increasing co-use ratio, future tower co-use discount on usage fee is expected to rise gradually
  • Potential future return: As one of the major shareholders (shareholding: 28.1%), the Company is expected to benefit from the Tower Company's future profits and value enhancement
  • However, it is expected that tower usage fee will pressure on the Company's profit in the short-term.
Taking into account the shareholder returns, profitability, debt obligations and cash flows of the Company, and the capital required for future development, the Board of Directors recommended a final dividend payout of RMB0.17 per share for the financial year of 2015.
In the second half of 2016, the Company will strive to drive gradual turnaround, leveraging opportunities, “Focus Strategies”, innovation and cooperation development. The priorities include:
  • To leverage 4G and Focus Strategy to accelerate mobile service growth with full strength;
  • To leverage high-quality applications to drive broadband value and sustain growth in fixed-line service;
  • To accelerate scale development in key innovative services to create new growth drivers;
  • To deploy premium network and strengthen support for front-line and customer services;
  • To strengthen innovation in systems and mechanisms to lift corporate vibrancy; and
  • To deepen quality and efficiency enhancement to bolster management capability.
The Company's parent company, China United Network Communications Group Company Limited (“Unicom Group”) joined the special topic meeting on state-owned enterprise mixed-ownership reform pilot-run convened by National Development and Reform Commission of The People's Republic of China on 28 September 2016. Currently Unicom Group is studying and discussing the mixed-ownership reform implementation plan. The selection of Unicom Group for the first batch of pilot-run on mixed-ownership reform has yet to obtain final approval, which is uncertain while concrete implementation plan is still under discussion.

With regard to the progress of the above matter, the Company will timely perform its disclosure obligation strictly in accordance with the listing rules and other legal and regulatory requirements.
Last updated: 27 October 2016