FAQs
In the first three quarters of 2017, the Company comprehensively deepened the implementation of Focus Strategy and centred on scale and profitable development through growth promotion, cost control and mechanism reform. Overall development momentum remained robust. Innovation in business model posted initial success, and underpinned revenue and profit growth. The Company's service revenue amounted to RMB 187,880 million, up by 4.1% year-on-year, which showed continuous improvement from the 3.2% increase year-on-year in the first half of 2017. EBITDA amounted to RMB 65,383 million, up by 5.9% year-on-year, which also showed continuous improvement from the 5.5% increase year-on-year in the first half of 2017. EBITDA as a percentage of service revenue was 34.8%. In the first three quarters of 2017, the profit attributable to the equity shareholders of the Company amounted to RMB 4,054 million, up significantly by 155.3% year-on-year.
In the first three quarters of 2017, the Company transformed the development model of its mobile service by stepping up online sales efforts via 2I2C, 2B2C, etc. in order to enhance the quality of new subscribers. With a low customer acquisition cost and subsidy model, the Company's mobile service growth accelerated. In the first three quarters of 2017, the Company's mobile billing subscribers registered a net addition of 13.04 million, reaching a total of 277 million. Mobile billing subscriber ARPU was RMB 48.4, up meaningfully as compared to the 2016 full-year average of RMB 46.4. Within that, 4G subscribers registered a net addition of 55.73 million, reaching a total of 160 million. 4G subscriber ARPU was RMB 65.6. In the first three quarters of 2017, mobile service revenue amounted to RMB 117,038 million, up by 6.7% year-on-year, which showed continuous improvement from the 5.2% increase year-on-year in the first half of 2017.
In the first three quarters of 2017, the Company actively promoted the scale development of innovative businesses, which offset the decline in fixed-line voice revenue and the pressure from the competition in the broadband market. Facing exceptionally fierce broadband competition, the Company promoted video-oriented high-bandwidth content and application products and optimised the end-to-end customer service in an effort to drive user consumption upgrade and integrated development. The number of fixed-line broadband subscribers reached 77.41 million, representing a net addition of 2.17 million as compared to the end of last year, but the fixed-line broadband access ARPU decreased year-on-year. Fixed-line service revenue was RMB 69,618 million, which remained stable as compared to the same period of last year.
In the first half of 2017, the Company actively leveraged its competitive advantages in the field of industrial Internet, focused on key areas, strengthened capability development, optimised business system and carried out cooperation on quality resources with the value chain, achieving new breakthroughs in innovative business development. In the first half of 2017, the Company's Information Communications Technology (ICT) revenue reached RMB1.87 billion, up by 15.6% year-on-year. Internet Data Centre (IDC) and cloud computing revenue reached RMB5.80 billion, up by 22.0% year on year. Internet of things connections exceeded 50 million. Merchants Union Consumer Finance's outstanding loan balance reached RMB32.0 billion. The Company continued to command leadership in big data business on personal credit rating and location-based services.
In the first half of 2017, the Company deeply promoted win-win cooperation with Internet companies and leveraged the big data analytics and its unique cBSS system platform advantages to promote 2I2C, 2B2C and other innovative business models, which effectively expanded the touchpoints for customer acquisition through targeted marketing and developed sub-divided segments to drive scale and profitable business development with low incremental costs.

In October 2017, China Unicom and Alibaba Group announced to mutually open up cloud computing resources and deepen cooperation in cloud business. Alibaba Cloud will comprehensively open the public cloud service capability to China Unicom, while both companies will continue to expand collaboration in e-government cloud and dedicated cloud (apsara stack) areas including vertical markets, as well as further deepen cooperation in the hybrid cloud business. In addition, China Unicom and Tencent jointly announced to leverage their respective rich resources and capabilities in communications, cloud computing and network security, and mutually open up these resources in order to accelerate and deepen integrated innovation in this powerful alliance to build a brand-new “cloud, pipe, terminal” Internet industry ecosystem platform.
In the first half of 2017, with a focus on improving quality and efficiency, the Company practised precise network deployment and increased the utilisation efficiency of existing resources. The Company maintained its network quality and perception in key regions on par with the industry while at the same time taking into account the investment returns. In the first half of 2017, the Company's capital expenditure decreased substantially by 49.5% year-on-year to RMB9.14 billion. The utilisation rate of the Company's 4G network reached 35%, and FTTH subscribers accounted for 74.2% of the total fixed-line broadband subscribers, which were both significantly higher as compared to the same period of last year. The Company continued to enhance its transmission, carrier network and other basic network capabilities, and its backbone network maintained the lowest latency in the industry. The Company closely monitored the evolution of new technology. It built the world's biggest single-city NB-IoT network in Shanghai and comprehensively introduced NFV technology to pave the way for future development.

The Company's CAPEX budget is RMB45.0 billion for 2017, down by 38% year-on-year.
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.
Looking ahead to the second half of 2017, as the Company ceased to charge mobile domestic long-distance and roaming fees from 1 September 2017, and market competition is expected to intensify cyclically in the second half of the year, the Company expects that its financial performance will face increasing pressure in the second half of the year. Our priorities include:
  • ŸTo strengthen business model transformation and match customers with right products at right channels to accelerate 4G development
  • ŸTo strengthen the incentive of front line and leverage integrated products to speed up the turnaround in broadband business
  • ŸTo strengthen capability development and optimise business organisation to drive scale development in innovative businesses
  • ŸTo tackle both the form and substance of the problems to lift customer service standard
  • ŸTo adhere to focus and cooperation, streamlined and efficient business operation in order to continuously enhance resources and assets efficiency
  • ŸTo deepen reform and improve operation management to establish the foundation for sustainable and healthy development
The mixed-ownership reform pilot-run of China Unicom aims to leverage China United Network Communications Limited (“Unicom A Share Company”), the controlling shareholder of the Company, as a platform to actively introduce domestic investors through integrated planning and to reduce the state-owned shareholding in Unicom A Share Company so as to implement the mixed-ownership reform. In addition, through the mixed-ownership reform pilot-run, Unicom A Share Company expects to further optimize its corporate governance structure and incentive system in accordance with the market-oriented principles, focus on the development of its principal businesses, establish an innovative business model, and further develop fundamental businesses and innovative businesses, so as to improve and enhance its overall efficiency and competitiveness and to achieve its strategic goals.

The mixed-ownership reform will be implemented by way of a combination of the non-public issuance of new shares and the transfer of existing shares of Unicom A Share Company. Unicom A Share Company will introduce strategic investors which are market leaders in the industry and which may create synergies with Unicom A Share Company. These strategic investors include large internet companies, leading vertical companies in the industry, industrial groups and financial enterprises with solid strength and leading domestic industrial funds, namely China Life, Tencent Cinda, Baidu Peng Huan, Jingdong Sanhong, Ali Venture Capital, Suning Commerce Group, Kuangchi Connection, Huaihai Ark, Aegon-Industrial Fund and China Structural Reform Fund. Assuming the transactions referred to are completed, the strategic investors will hold an aggregate shareholding of approximately 35.19% in Unicom A Share Company, resulting in a diversified shareholding base in Unicom A Share Company.

Depending on the net proceeds received by Unicom A Share Company from its non-public share issuance, Unicom A Share Company and Unicom Group will subscribe for a maximum of 6.65 billion shares of the Company (“Proposed Subscription”) through China Unicom (BVI) Limited (“Unicom BVI”), which represents approximately 21.7% of the enlarged share capital of the Company. The subscription price is HK$13.24 per share, a 10% premium to the closing price of HK$12.04 on 22 Aug 2017 (the date of the share subscription agreement), and the maximum gross proceeds of the Proposed Subscription will be HK$88.1 billion (equivalent to approximately RMB75.0 billion). Upon the completion of the Proposed Subscription, Unicom BVI's shareholding in the Company will increase from 40.61% to 53.52%.

The non-public issuance of shares by Unicom A Share Company has been approved by the shareholders of Unicom A Share Company and China Securities Regulatory Commission. The Proposed Subscription has also been approved by the shareholders of the Company, and is expected to be completed by the end of 2017.
An employee incentive scheme involving, among others, the issue of restrictive shares to core employees of China Unicom, shall be established by Unicom A Share Company to attract and retain high calibre employees and to achieve an alignment of interests among the shareholders, the Company and its employees.

The board of directors of Unicom A Share Company proposes to initially grant to about 7,500 core employees not more than approximately 850 million restrictive shares of Unicom A Share Company on the basis of the contributions of the employees to the operating results. The grant price is proposed to be RMB3.79 per share, raising funds of not more than approximately RMB3.21 billion. Considering the fact that after the mixed ownership reform, the Company will deeply cooperate with the new strategic investors to foster scale development of innovative businesses, 10% of restrictive shares under the Scheme have been reserved for potential new talents to be recruited in areas such as IP, IT and innovative businesses, etc. in order to achieve the alignment and simultaneous upgrade of our human capital structure and our business structure, driving the Company's leapfrogging growth.

The restrictive shares of the initial grant have a lock-up period of 24 months and an unlocking period of 36 months. During the unlocking period, restrictive shares are unlocked in the ratio of 4:3:3 for each 12-month period. Restrictive shares shall be unlocked only if both corporate and individual performance conditions are met. The corporate performance conditions for unlocking the restrictive shares are:

a) Above-industry-average service revenue growth: compared to 2017, the growth rates of service revenue of Unicom A Share Company for 2018-2020 shall not be less than 4.4%, 11.7% and 20.9% respectively and shall not be less than the average of the three operators in the industry. The revenue for 2017 will be set based on at least 4.5% growth vs 2016

b) Substantially faster growth of profit before tax: compared to 2017, the growth rates of profit before tax of Unicom A Share Company for 2018-2020 shall not be less than 65.4%, 224.8% and 378.2% respectively and shall not be less than the 75 percentile in the industry. The profit before tax for 2017 will be set based on at least an increase of RMB4.72 billion vs 2016

c) Fast improving return on equity: the return on equity of Unicom A Share Company for 2018-2020 shall not be less than 2.0%, 3.9% and 5.4% respectively.
Last updated: 31 October 2017