In the first quarter of 2018, the Company continued to deepen the Focus Strategy, promote growth, control costs and reform mechanism. Overall service revenue amounted to RMB 66,609 million, up by 8.4% year-on-year. Benefitting from the robust service revenue growth and effective cost control, its profitability continued to improve significantly. EBITDA amounted to RMB 23,909 million, up by 14.0% year-on-year. EBITDA as a percentage of service revenue was 35.9%. The profit attributable to the equity shareholders of the Company amounted to RMB 3,005 million, up significantly by 248.7% year-on-year.
In the first quarter of 2018, the Company actively promoted the mobile business model transformation and enhanced the quality of new subscribers through innovating products and marketing models. Using a low cost and subsidy model for expanding subscriber base, the Group achieved accelerated growth in mobile service. In the first quarter of 2018, the Company's mobile billing subscribers registered a net addition of 9.78 million as compared to the end of last year, reaching a total of 294 million. Mobile billing subscriber ARPU was RMB 47.9, up by 2.6% year-on-year. Within that, 4G subscribers registered a net addition of 19.33 million, reaching a total of 194 million. Mobile service revenue amounted to RMB 41,511 million, up by 11.6% year-on-year.
In the first quarter of 2018, the Company actively promoted the scale development of innovative services, striving to offset the decline in fixed-line voice revenue and the competitive pressure on the fixed-line broadband market. Revenue from industrial Internet business amounted to RMB 5,876 million, up by 36.0% year-on-year. Facing intense competition in the broadband market, the Company further optimised product offerings, strengthened operation and services, and stimulated the sales vibrancy of front-line staff to constantly enhance the differentiated competitive advantages of its broadband business, leveraging video offering, integrated products and e-commerce channels. The number of fixed-line broadband subscribers reached 78.06 million, representing a net addition of 1.52 million as compared to the end of last year, but the fixed-line broadband access ARPU decreased year-on-year. Fixed-line service revenue amounted to RMB 24,617 million, up by 3.4% year-on-year.
In 2017, the Company actively developed its business by focusing on the complementary resources and business synergies brought in by the strategic investors. Focusing on key industries and key services, it embraced open cooperation and adopted innovative incentive systems to jointly develop an innovative and win-win industry ecology. The Company achieved new breakthroughs in key innovative services. ICT revenue reached RMB3.32 billion, up by 11.0% year-on-year. IDC and Cloud computing revenue reached RMB11.02 billion, up by 16.6% year-on-year. Internet of Things revenue reached RMB1.41 billion and Big Data revenue reached RMB0.16 billion.
In 2017, the Company deeply explored and integrated strategic investors' resources, strengths and took full advantage of the edges of its own fundamental business capabilities. Focusing on key innovative segments including channel touch points, Cloud computing, Big Data, Internet of Things, retail system, video contents, home Internet and basic communications, the Company established powerful alliance and engaged in-depth cooperation with strategic investors, thereby creating a new driving force for innovative business development. During the year, through leveraging the online marketing touch points of Tencent and various other large Internet companies as well as the synergetic development across online and offline marketing, the Company developed about 50 million 2I2C subscribers at low costs. The Company conducted in-depth cooperation with Baidu in Internet of Things, artificial intelligence and Big Data, etc. The Company entered into in-depth cooperation in Cloud services with Tencent and Alibaba through mutual resources and capabilities sharing. The Company built smart living experience stores jointly with JD.com, Alibaba and Suning to actively explore New Retail business model. The Company carried out in-depth cooperation with strategic investors in basic communications business to promote resources sharing and business synergy, thus achieving a win-win situation for all parties.
By focusing on improving quality and efficiency, the Company pushed forward precise investment, cooperation, sharing and proactively unleash value from resources to improve returns in 2017. The Company offered competitive network quality despite a significant reduction in capital expenditure of 41.6% year-on-year to RMB42.13 billion. The Company's network quality and customer perception in key regions continued to rise. Its 4G network uplink and downlink average speeds were leading in the industry. The Net Promoter Score (NPS) of mobile network and fixed-line broadband continued to improve and Internet network latency performance ranked the best in the industry. Network efficiency significantly improved. 4G network utilisation rate increased to 57% and the percentage of FTTH subscribers to total broadband subscribers reached 77%.

In 2018, the Company will continue to stay efficiency-focused and effectively deploy our network. Full-year CAPEX is expected to be not more than RMB50.0 billion.
The Company attached great importance to shareholders' returns. Taking into consideration the Company's profitability, debt and cash flow level and capital requirements for its future development, the Board recommended, with reference to 40% of the net profit excluding the net loss on asset disposal related to fibre network upgrade in 2017, the payment of a final dividend of RMB0.052 per share. Going forward, the Company will continue to strive to enhance its profitability to improve corporate efficiency and shareholders' returns.
In 2018, the Company will promote high-quality development with Internet-oriented operation. Our priorities include:
  • To strive to develop "Four Systems" for operational responsibilities, sales responsibilities, innovative businesses, branding and services
  • To transform investment and network deployment model to rapidly answer market demand
  • To build an open network service system to enhance network advantages, efficiency and customers' perception
  • To strengthen IT capability to critically support Internet-oriented operation
  • To activate intrinsic vibrancy brought by reform and innovation, setting benchmark of mixed-ownership reform
  • To continue to strengthen fundamental management and deepen the establishment of corporate culture and integrity
In 2017, adhering to the principle of "enhance governance, strengthen incentives, protrude core businesses and raise efficiency", the Company implemented mixed-ownership reform by using Unicom A Share Company, the controlling shareholder of the Company, as the platform. By introducing strategic investors and leveraging external resources and capabilities, the Company innovated the business cooperation model and achieved strategic business collaboration. It pushed forward system and mechanism reforms, established sound and effective corporate governance and market-oriented incentive mechanism to elevate corporate vitality and efficiency, creating better returns for shareholders and employees.

Through non-public issuance of new shares and transfer of existing shares of Unicom A Share Company held by Unicom Group, Unicom A Share Company successfully introduced 14 industry leaders as strategic investors who are complementary to the Company's business development. Approximately RMB75.0 billion was raised and injected into China United Network Communications Corporation Limited (CUCL), a wholly-owned subsidiary of the Company. All the proceeds will be used by CUCL for upgrading 4G capabilities, technology validation and enablement of 5G network related technologies, launching trial programmes in relation to 5G network and developing innovative services. The injection of external capital effectively enhanced the Company's financial position and improved its risk control capability.
In 2017, the Company seized the opportunity of mixed-ownership reform to deeply propel innovative reform of mechanism and system. By downsizing and streamlining corporate structure, the Company promoted staff migration to the frontline and established a lean and highly efficient organisational structure. The number of departments at the headquarters was reduced by 33%. The number of institutions at provincial branches was reduced by 21%. On average about 15% of mid-level management were withdrawn. It advanced market-oriented and contractual management of managerial personnel such that positions could go up and down, staff could get in and out while compensation could increase and decrease. The Company pushed forward sub-division and contract-out, selected "mini CEOs" based on a competitive mechanism, vitalised incentives and compensation allocation, and stimulated the internal vibrancy of front-line staff. Unicom A Share Company launched an employee restrictive share incentive scheme. Restrictive shares were granted to core employees. Unlocking conditions are prescribed for units and individuals at all levels on a scientific basis so as to combine short-term and long-term incentives, and align shareholder, corporate and employee interests.
The objective of the employee restrictive share incentive scheme of Unicom A Share Company is to attract and retain high calibre employees and to achieve an alignment of interests among the shareholders, the Company and its employees.

A total of not more than 848 million restrictive shares of Unicom A Share Company are granted to employees (including core employees of the Group) under the initial grant of the employee restrictive share incentive scheme of Unicom A Share Company. Unlocking conditions are prescribed for operating units and individuals at all level. The incentive shares are allocated on the basis of the contributions of the employees to the operating results. The grant price was RMB3.79 per share.

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 the 2017 basis, 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 2017 basis on service revenue is RMB249.02 billion.

b) Substantially faster growth of profit before tax: compared to the 2017 basis, 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 75th percentile in the industry. The 2017 basis on profit before tax is RMB5.30 billion.

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.

For the details of Unicom A Share Company's share incentive scheme, please refer to the related Unicom A Share Company's public announcements filed with The Shanghai Stock Exchange on 11 February 2018.
Last updated: 30 April 2018