China Unicom FY15 profit falls 12% due to competition

telecomasia.net

China Unicom, the country’s second largest telecoms operator, posted its first decline in net profit since 2010 for last year due to the complex changes of the business environment and intensifying competition.

Full-year profit fell 12.4% to 10.56 billion yuan ($1.62 billion), compared with 12.06 billion yuan a year earlier. Revenue fell for the second consecutive year, by 2.7% to 277.05 billion yuan from 284.68 billion yuan in 2014.

China Unicom chairman and CEO Wang Xiaochu blamed the poor performance on changes in government policies, such as “speed upgrade and tariff reduction” and a value-added tax the Beijing government levied on telecoms operators in June 2014. From last October, the government has also required operators to carry forward unused data traffic of individual subscribers to the following month, which put further pressure on operators’ revenue.

The changing competitive environment also took toll on the company’s mobile business, Wang added.

“Due to asymmetric 4G licensing, our competitive advantage in 3G has been fading out fast,” Wang told reporters at a media briefing in Hong Kong.

Mobile service revenue slumped 8% to 142.62 billion yuan. The number of mobile subscribers declined by 14.26 million to 252.32 million, as biggest rival China Mobile made a strong push in promoting 4G business during the year.

“Facing the complex business environment, the company timely adjusted operating priorities to focus resources on 4G,” said Wang, who became Unicom chairman in August. He was previously chairman and CEO of rival China Telecom.

Unicom has increased and accelerated 4G investment on network, terminal and converged offerings. It has also upgraded 4G network speed with continuous 4G coverage in nationwide urban areas, counties and developed towns as well as in-depth coverage in key cities. The company has quickly boosted 4G handset market share while optimizing channel mix and its integrated offering has also driven interactive promotion.

The company also signed a strategic agreement with China Telecom in January to share resources and improve efficiency, initially focusing on areas covering transport lines, remote villages, new indoor distribution and scenery spots. Unicom said it aims to reduce the network construction costs and rapidly enhance the customer experience through cooperation. The two companies will fully cooperate in terms of network co-building, handset standardization and developing innovative new services.

Wang said Unicom's revenue has fallen for 17 months in a row, but with the above measure, "silent momentum" of the operator's 4G business has emerged. Unicom had added 5.27 million and 5.38 million 4G users in January and February, respectively, which has also driven month-on-month improvement in the monthly average mobile service revenue.

"We hope to stabilize the revenue decline in the short term, and turn the tables on profit performance in one year," Wang noted.

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