China Unicom boosts earnings but sales remain flat | Light Reading

China Unicom boosts earnings but sales remain flat | Light Reading

China Unicom has overcome flat revenue growth to post an 11.1% increase in net earnings for 2019.

The state-owned telco slashed opex by 22% and marketing cost by 5% to record a 11.3 billion yuan ($1.6 billion) full-year profit, it revealed today.

But like rival China Mobile, the improved financial performance can’t hide its tepid topline growth. (See China Mobile reports 15.4M 5G customers.)

“In 2019, the domestic telecommunications industry development experienced a short-term pain with weak revenue growth and pressure on industry value,” Chairman and CEO Wang Xiaochu said.

Revenue of RMB290.5 billion ($41 billion) was off 0.1%, while service revenue increased just 0.3% to RMB264.4 billion ($37.3 billion).

Unicom’s core mobile services business declined 5%, despite an extra 3.4 million customers, while its broadband segment shrank 1.7%.

Over the last six years China Unicom’s gross revenue has increased just 2% as first its voice and now its data businesses felt the impact of increased competition and government-mandated price-cutting.

As signs of improvement, Unicom pointed to its 11% increase in earnings before interest, tax, depreciation and amortization (EBITDA) and the rise of 3.5 points in EBITDA as a percentage of service revenues.

It also stressed the gains in its emerging enterprise services.

The industrial Internet unit grew by 43% and now accounts for 12% of total services sales. IT services revenue reached RMB10 billion ($1.4 billion), up 78% year-on-year, while the IoT business grew 46%, to RMB3 billion ($420 million).

The cloud and big data segments, while still small, each more than doubled sales.

The company also said it is reaping the benefit of the network sharing partnership struck with China Telecom last September.

The two telcos had jointly saved RMB10 billion ($1.4 billion), Unicom said, enabling it to invest RMB29.7 billion ($4.2 billion) in its mobile networks up 59% from the previous year as it readied its 5G network ahead of national launch last November.

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Total capex for 2019 was RMB56.42 billion ($8 billion), 25% higher than in 2018.

Unicom said it currently shares 50,000 basestations with China Telecom, out of a total of 60,000 available for its 5G service.

It expected to expand the China Telecom partnership in coming years to new areas including “4G indoor distributed antenna systems, server rooms, optical fiber and pipelines.”

Unicom’s stock on the HKSE closed down 6.42%. The stock has fallen 38% in the last month, from HK$6.60 to HK$4.10.

Robert Clark, contributing editor, special to Light Reading

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