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China Unicom suffers through 94.1% profit loss as it works on long term gains

21 Mar 17

State-owed telecommunications provider China Unicom has experienced steep profit losses as the company focused on long term development rather than short term profit.

The company’s net profit was RMB 0.63 billion, a 94.1% drop from its 1.06 billion in 2015. Operating revenue dropped only 1% however, sitting at RMB 27.4 billion.

The company says it faced ‘acute’ challenges from market competition last year, which led to a strategy it calls ‘Focus, Cooperation and Innovation’ as it addressed the underlying shortcomings.

Despite the profit loss, business and service revenue restored to a ‘positive and steady momentum’ as it traded short term profit pressure for more sustainable long-term development. The company says it is achieving initial success in a gradual turnaround on unfavourable market conditions.

The company improved its network capability while dropping capital expenditure by 46.1%. This enabled the free cash flow to turn a positive RMB 2.48 billion.

However given the financial state of the company, the Board will not be paying a dividend this year.

China Unicom’s chairman and CEO Wang Xiaochu says the company is not giving up on its progress.

“Looking into the future, the company will respond to hardships and challenges face-to-face, grab development opportunities, deepen the implementation of Focus Strategy, persistently uphold scale and economical development as the centre, promote growth, control costs and reform mechanism, thus pushing the company to shorten the odyssey of transformation, as well as to accelerate the turnaround in future, and step onto the healthy development path,” he says.

China Unicom has also been focusing on developing ‘innovative services’ in fibre networking, industrial internet and platform-based services. Its IDC and cloud computing revenue saw a 33.7% increase, reaching RMB 9.45 billion.

The company has been pushing its 4G and mobile service revenue which saw a 1.7% increase, bringing the total to RMB 145 billion last year. It now has 104 million 4G subscribers. 

It has increased the number of 4G base stations to 736,000. Ten provinces in China achieved the ‘all fibre network’ that included 100Mbps capability.

China Unicom is also pushing into the broadband in both fixed-line and fibre-to-the-home services.

The company pledges to focus its transmission-based basic services as its main revenue stream, however China’s “Internet Superpower and “Internet+” action plan implemented by the State will make IoT, big data and cloud computing good sources of revenue.

“In the meantime, further release of reform benefits generated within and beyond the Company will promote China Unicom to change its operational mechanism at a higher level,” the company concludes.

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