China Unicom’s Earnings Grow On Lower Costs, Rising Wireless Subscriber Base

+25.70%
Upside
5.47
Market
6.88
Trefis
CHU: China Unicom logo
CHU
China Unicom

China Unicom (NYSE:CHU), the second largest Chinese wireless carrier, published its full-year 2018 results on March 13. The company’s net profits for the year grew almost four-fold to RMB 10.2 billion ($1.52 billion), driven by a growing mobile subscriber base as well as lower tower usage fees and reduced handset subsidy costs. Below we take a look at some of the trends that drove the company’s wireless business.

Our interactive analysis on our price estimate for China Unicom shows our key drivers and forecasts for the company. You can adjust the key drivers to arrive at your own price estimate for the company. In addition, you can view all Trefis data for Trefis data for Telecommunications companies and Consumer Staples companies.

Subscriber Base Expands On 2I2C Initiative

Relevant Articles
  1. Is The Market Undervaluing Chinese Telcos: A Comparison With Verizon & AT&T?
  2. Will China Unicom Be Able To Shake Off Revenue Headwinds In 2020?
  3. China Unicom’s Revenues Should Trend Steadily Higher, Driven By Wireless Business
  4. A Look At China Unicom’s Subscriber Performance Over The First Half Of 2019
  5. What To Watch As China Unicom Reports FY’18 Results
  6. Why China Telecom Continued To Outperform In January

China Unicom’s mobile business added a total of about 31 million subscribers over the last year, taking its total subscriber base to 315 million. The growth was driven by the company’s increasing emphasis on online sales under its 2I2C initiative, which is seeing the company cooperate with Internet giants Baidu, Alibaba, and Tencent for new customer acquisitions. This sales model is helping the company better target customers while reducing the resources it allocates to physical retail outlets. The company noted that its 2I2C driven subscribers reached 94 million, marking a net addition of 44 million.  Separately, the company has also been offering products targeted at heavy data users, and this has been increasingly popular in China.

However, the China Unicom’s wireless ARPU declined by about 5% year-over-year, coming in at RMB 45.7 ($6.81), driven by the government’s move to limit data tariffs and cut roaming and long-distance charges. This came despite the fact that data usage per handset more than doubled, with 4G penetration in the company’s user mix standing at 70%, up from around 61% a year ago.

Further Expanding 4G Network, Carrying Out 5G Trials

China Unicom has been focusing on improving its network – which was previously a key handicap – by deploying more towers, while also leveraging big data and analytics tools to identify traffic hotspots for more accurate capacity expansion. For 2019, the company has outlined capital expenditures of RMB 58.0 billion ($8.6 billion), up from RMB 44.9 billion ($6.69 billion) in 2018. The spending will focus on further increasing coverage and capacity, with greater deployment of 900 MHz LTE bands. The company has also been carrying out its 5G trials in 17 cities, noting that it would expand the trials based on results.

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

All Trefis Data

Like our charts? Explore example interactive dashboards and create your own.