In the first three quarters of 2018, the Company insisted on deepening the implementation of the Strategy of Focus, Innovation and Cooperation and fully accelerated the establishment of China Unicom's "Five New". It gradually sped up the pace in driving Internet-oriented operations, while its efforts in mixed-ownership reform started delivering notable enhancement in growth momentum, quality and efficiency. Service revenue amounted to RMB 200,013 million, up by 6.5% year-on-year. EBITDA amounted to RMB 66,246 million, up by 1.3% year-on-year. EBITDA as a percentage of service revenue was 33.1%. The profit attributable to the equity shareholders of the Company amounted to RMB 8,780 million, up significantly by 116.6% year-on-year. It included an increase of RMB 1,474 million in the Company's share of net profit of associates resulting from the change in the Company's shareholding percentage in China Tower after its listing and new share issuance.
In the third quarter of 2018, the Company continued to implement the national policy of "speed upgrade and tariff reduction", and cancelled domestic handset data "roaming" fees with effect from 1 July. In the first half of 2018, the Company prepared in advance by strengthening data traffic operation, optimising tariff packages and strengthening efforts to promote heavy data packages, in order to facilitate a smooth transition for customers and strive to achieve win-win leveraging price elasticity. It mitigated the downward pressure on the Company's mobile service revenue in the third quarter resulting from the cancellation of domestic handset data "roaming" fees.

In the first three quarters of 2018, the Company centred its energy on driving business model innovation with light touchpoints and low acquisition costs. It stepped up effort in transformation on Internet-oriented operation, and actively countered intensified competition, achieving fast and efficient development of mobile service. The Company's mobile service revenue amounted to RMB 125,424 million, up by 7.2% year-on-year. Mobile billing subscribers registered a net addition of 25.66 million, reaching a total of 310 million. Within that, 4G subscribers registered a net addition of 38.97 million, reaching a total of 214 million. Mobile billing subscriber ARPU declined year-on-year to RMB 46.8.
In the first three quarters of 2018, facing intense competition in the fixed-line broadband market, the Company adhered to the strategy of "big integration, big bandwidth and big video" and continued to optimise the array of integrated products. It focused on promoting high-bandwidth and contents driven products and continuously enriched quality video content. The Company's fixed-line broadband business continued to report improvements. The number of fixed-line broadband subscribers reached 80.35 million, representing a net addition of 3.81 million as compared to the end of last year. Fixed-line broadband access revenue reached RMB 32,039 million, which was largely stable as compared to the same period in 2017.
In the first three quarters of 2018, the Company accelerated the efforts in sharpening the core capability in innovative product platforms and products, established system and mechanism segregated from its fundamental services, and proactively expanded business and capital cooperation with strategic investors from mixed-ownership reform, so as to drive new breakthroughs in its innovative business. Revenue from industrial Internet business amounted to RMB 17,249 million, up by 35.7% year-on-year.
During the first half of the 2018, the Company advanced comprehensive and in-depth cooperation with strategic investors. The Company continued to cooperate with Tencent, Alibaba, Baidu, JD.com and DiDi to expand Internet touch points, effectively reaching out to new customers, especially the youth market, achieving a development model with low subscriber acquisition cost and subsidy. Its 2I2C business saw rapid growth with subscriber base reaching 77 million and driving the rapid growth in 4G subscribers. The public cloud products branded as ‘‘WO Cloud'' were launched in association with Alibaba and Tencent, providing differentiated products and services to the Company's customers. Cooperation in cloud-network integrated products was also kicked off, aiming to equip customers with capability in hybrid cloud networking. The joint venture with Alibaba created a powerful alliance to offer customised application software services to government and enterprise customers. Active efforts were made to explore the development of New Retail pilot outlets, as the Company joined forces with Alibaba, Suning, JD.com and Tencent. Making good use of Big Data, the Company was able to enrich product portfolio in stores and strengthen synergy and flow between online and offline operation, resulting in a significant boost for its business development. The Company's cooperation with strategic investors in innovative businesses, such as IPTV, mobile video contents, Big Data, IoT and AI, and in fundamental businesses continued to report smooth progress with win-win development.
In the first half of 2018, the Company upheld its precise investment strategy and strived to enhance investment returns by taking extensive effort to exploit the potential value of various resources and drive sharing through cooperation. Capital expenditure amounted to RMB11.6 billion. The Company continued to see network quality and customer perception on the rise in focused regions, as it achieved industry leading average uplink and downlink speeds in 4G networks, Net Promoter Score (NPS) on mobile network and fixed-line broadband enhanced further and Internet network latency being industry-best.

In second half of 2018, the Company will continue to stay efficiency-focused and effectively deploy its network. Full-year CAPEX is expected to be approximately RMB50.0 billion.
Taking into account the Company's profitability, debt obligations and cash flow level, capital requirements for future development, etc., the Board of Directors decided not to pay an interim dividend for 2018. The Board will submit a proposal for final dividend payment based on the Companys' full-year results for 2018 for consideration at the shareholders' general meeting.
The cancellation of domestic mobile data ‘‘roaming'' charges effective 1 July 2018 and the cyclical escalation of market competition in the second half of the year will collectively impose challenges for the Company's development. In the second half of 2018, the Company will actively cope with challenges and persistently deepen the execution of its Strategy of Focus, Innovation and Cooperation. It will accelerate the establishment of ‘‘Five New'' to drive high-quality sustainable growth in full-force. Its priorities include:
  • To pursue differentiated development and maintain high-quality growth momentum unabated;
  • To pursue efficiency and return-oriented development and strive to enhance all-factor productivity through Internet-oriented operation transformation;
  • To comprehensively strengthen fundamental in various aspects to lay a solid foundation for future sustainable growth;
  • To step up investments appropriately for nurturing the future growth engines; and
  • To deepen strategic cooperation and system and mechanism reform to accelerate the delivery of benefits from reform and generate better return for shareholders.
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 the first half of 2018, continuous efforts were made to streamlining and re-organisation. Through reducing demand on outsourcing and encouraging staff to join sub-divided units and innovative business, the Company's organisation and staff structure were further optimised. To charge up energy for innovative business development, the Company had appropriately stepped up human capital investment by actively recruiting new talents in innovative business and strengthening the performance-based incentives mechanism to achieve a better alignment of efforts and rewards. It adopted a differentiated compensation system for the innovative business which was segregated from traditional business. The sub-division reform was deeply enforced, aiming to achieve sharing of incremental return with revenue and gross profit as KPIs, while aligning responsibilities with authorities and rewards to lift corporate vibrancy and efficiency. China Unicom A Share Company's employee share incentive scheme, with unlocking conditions set on a scientific basis, was smoothly launched, with 794 million restrictive shares of the China Unicom A Share Company being issued to 7,752 key managerial staff and talents under the initial grant and set to align shareholders' and staff interests with the corporate development.
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.

794 million restrictive shares of Unicom A Share Company were granted to 7,752 key managerial staff and talents (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:

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.

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.

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: 26 October 2018