Addressing acute challenges from market competition in 2016, the Company actively advanced the implementation of the new development strategy centred on "Focus, Cooperation and Innovation" and increased cost initiatives as appropriate to strive to mitigate the underlying shortcomings. As a result, business and service revenue restored to a positive and steady momentum. Service revenue of the Company bottomed out and reached RMB240.98 billion, up 2.4% year-on-year. The Company's EBITDA amounted to RMB79.50 billion, down by 9.1% year-on-year and accounted for 33.0% of the service revenue. Profit attributable to equity shareholders of the Company was RMB0.63 billion, down by 94.1% year-on-year, which, however, showed substantial improvement compared to the loss attributable to equity shareholders of the Company (excluding the gain on disposal of tower assets) of approximately RMB3.36 billion in the second half of 2015. Going forward, the Company will continue to deepen the implementation of Focus Strategy and strive to improve profitability.
In 2016, the Company focused on the acceleration of 4G business development, driving the turnaround of the operational challenges of mobile service. Mobile service revenue bottomed out and achieved RMB145.02 billion, up 1.7% year-on-year. The number of mobile billing subscribers beat the downward trend for consecutive months in 2015, registering a net addition of 11.51 million and reaching a total of 263.82 million mobile billing subscribers. The ARPU of mobile billing subscribers remained stable with a slight increase to RMB46.4. In 2016, the number of 4G subscribers of the Company demonstrated a net increase of 60.40 million to a total of 104.55 million. The proportion of 4G subscribers to mobile billing subscribers increased by 22.1 percentage points year-on-year to 39.6%, still with enormous potential for growth.
In 2016, the Company sped up the development of innovative services such as Internet Data Centre (IDC)/cloud computing, Information Communications Technology (ICT), video, Internet of Things (IoT) and others, effectively offsetting the revenue decline in fixed-line voice. The fixed-line service revenue reached RMB94.66 billion, up 3.7% year-on-year. 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 Company's fixed-line broadband access revenue amounted to RMB43.87 billion, maintaining steady performance year-on-year. Fixed-line broadband subscribers increased by 4.0% year-on-year to 75.24 million, of which 71.2% were Fibre-to-the-home (FTTH) subscribers. "Smart WO Family" subscribers accounted for 26.1% of the fixed-line broadband subscribers, up 12.8 percentage points year-on-year.
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 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: 03 April 2017