So far this year, the novel coronavirus outbreak has posed challenges to the Company, especially in terms of business development, customer acquisition, 5G network deployment and risk of bad debt, etc. The outbreak has also accelerated demand by economy and society for transformation on digitisation, cyberisation and intelligence, thereby creating new opportunities to the Company. The Company made use of new technologies such as Big Data, AI and 5G to support precise epidemic control and smart public administration as well as resumption of work and business production. Meanwhile, it also accelerated the transformation of Internet-oriented operation, provided innovative communications service offerings and actively promoted new informatisation applications, striving to turn adversity into opportunities.
In the first quarter of 2020, facing challenges such as market saturation, keen market competition and the novel coronavirus outbreak, the Company deepened transformation and innovation, strengthened differentiated and Internet-oriented operation while expediting the capability development and scale expansion of industry Internet business. It enhanced integrated offerings and rigorously controlled customer acquisition cost, striving to safeguard corporate value and drive high-quality development. For the first quarter of 2020, the Company's overall service revenue amounted to RMB 68,307 million, up by 2.3% year-on-year. EBITDA amounted to RMB 23,561 million, down by 5.8% year-on-year, but up by 11.1% quarter-on-quarter. EBITDA as a percentage of service revenue was 34.5%. The profit attributable to the equity shareholders of the Company amounted to RMB 3,166 million, down by 13.9% year-on-year, but up by 110.1% quarter-on-quarter.
The Company has timely adjusted the development priority since the second half of last year. It strengthened self-discipline on rational and orderly competition. It shifted focus from subscriber scale to subscriber quality and value. It deepened innovative transformation and rigorously controlled selling expenses and the ineffective and low-value products and channels. Despite the short-term impact on mobile business development, the Company believes that it will benefit long-term corporate development and value maximisation. In addition, due to the outbreak, mobile billing subscribers registered a net loss of 7.47 million, reaching a total of 311 million, in the first quarter of 2020. Within that, 4G subscribers reached 255 million. Mobile billing subscriber ARPU was RMB 40.0. Mobile service revenue amounted to RMB 37,749 million, down by 4.1% year-on-year, where the rate of decline narrowed as compared to -5.3% for the full year of last year.

Going forward, the Company will focus resources on the development of mid-to-high-end differentiated products, leverage privileges, content and financial tools to enhance product value and make use of Big Data analytics to enhance targeted marketing and customer retention. Meanwhile, the Company will actively capitalise on 5G network "co-build co-share" advantage to sharpen competitive edges and return, striving to drive gradual mobile service revenue rebound via consumption upgrade led by 5G innovative applications. It is expected that 5G network user growth will accelerate in the second half of this year, in pace with accelerated network deployment, proliferation and declining price of 5G terminals and more prevalent innovative applications.
Facing the fierce market competition, the Company was persistent in rational and orderly competition. It continued to consolidate the advantages of its high bandwidth and integrated product with a view to actively coping with challenges. In the first quarter of 2020, fixed-line broadband subscribers registered a net addition of 1.35 million, reaching a total of 84.83 million. Fixed-line broadband access revenue rebounded to RMB 10,785 million, up by 4.4% year-on-year.
The Company drove the mutual development of innovative businesses and fundamental services through the integrated operation of "cloud + smart network + smart application". It built a cloud business capability platform and industrial Internet solutions and products through ecological cooperation. It collaborated with leading players in certain key industries to actively create typical 5G use cases and accelerate the incubation of innovative 5G industry applications, generating energy for future growth. For the first quarter of 2020, revenue from Industry Internet business amounted to RMB 11,448 million, up by 32.2% year-on-year.
The Company was committed to a highly-efficient, well-paced and focused approach in 5G network deployment. We undertook the concept of open innovation, win-win cooperation and actively promoted the "co-build and co-share" of network. On 9 September 2019, the Company entered into a cooperation agreement with China Telecom to jointly build one 5G access network across the country, creating a new model of centralised and rapid development of 5G. While significantly saving capital expenditure, the Company would enjoy the doubling of 5G network coverage, bandwidth, capacity and transmission speed, providing users with better experience. The two companies (China Unicom and China Telecom) jointly saved investments costs of RMB10 billion. By the end of 2019, there were more than 60,000 5G base stations available for use by the Company, supporting the evolvement of 5G service from trial to commercial launch.

In the future, the Company will leverage the advantages of "co-build and co-share" and invest steadily, precisely and dynamically on 5G network deployment, with due regard to the technological progress, maturity of the value chain, as well as market and business demand, etc. While achieving material saving in capital expenditure and operating expenses, the Company would see its 5G network quality comparable with the leading operator.
The Company will leverage its various 5G unique edges to drive revenue growth and value enhancement in future, including:
  • Potential collaboration with 14 strategic investors and benefits from market-oriented system and mechanism reform, leveraging mixed-ownership reform
  • Centralised IT capability
  • Well-established Internet-oriented mindset and operation
  • Fast growth of innovative businesses underpinning future 5G application development and roll-out
  • Enhanced edges and return via 5G network "co-build and co-share"
In 2019, as the Company actively and continuously leveraged the edges in resources and capabilities of its strategic investors to deepen and innovate the cooperation, further synergy emerged.

In connection with touchpoint, the Company continued to advance cooperation with partners in online touchpoints and privilege and promoted offline cross-industry cooperation. As at the end of 2019, 2I2C subscribers reached nearly 100 million. The Company deeply and comprehensively integrated basic communication capabilities, smart hardware and content applications, and successfully created a number of new smart family products. In cloud computing, ongoing cooperation with Alibaba, Tencent and Baidu on public cloud and cloud networking, etc., was carried out, enhancing the business development capability driven by the synergy of cloud and network. In terms of big data, the smart cultural tourism joint venture, established between the Company and Tencent, kicked off a number of key projects across the country. Smart Steps, a joint venture, successfully introduced the investment from JD Digits and became No. 1 service provider in the country in demographic planning and big data. In Internet of Things, the Company carried out all-around cooperation in smart connectivity in areas such as mobile payment, travel service and smart wearable, with an increase of nearly 10 million connections during 2019. At the same time, the Company deepened business cooperation and continued to explore joint investment opportunities in industrial internet, 5G+AI, content aggregation, payment finance and basic communication, while strengthening the alliance and creating new energy for innovative business development.
In 2019, the Company persisted in precise and highly efficient investment and innovatively rolled out the "co-build and co-share" of 5G network, saving substantial capital expenditure while ensuring the highly efficient deployment of 5G network. In 2019, the Company's capital expenditure amounted to RMB56.4 billion, of which 5G CAPEX was about RMB7.9 billion. The Company's network quality and customer perception continued to improve in the focused regions. The Net Promoter Score (NPS) for mobile network and the NPS for fixed-line broadband services continued to increase. The average uplink and downlink speed of 4G network continued to lead the industry and the network latency garnered the best performance in the industry.

Full-year CAPEX for 2020 is expected to be approximately RMB70.0 billion, of which 5G CAPEX is about RMB35.0 billion.
The objective of the dividend policy of the Company is to achieve a long-term, sustainable and steadily increasing dividend, with a view to maximising the shareholders' value. The declaration and payment of future dividends will depend upon, among other things, financial condition, business prospects, future earnings, cash flow, liquidity level and cost of capital. The Company believes such policy will provide the shareholders with a stable return in the long term along with the growth of the Company. Pursuant to the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) and the Company's articles of association, the Company may only pay dividends out of profits available for distribution.

Taking into consideration the Company's profitability, debt and cash flow level, capital requirements for its future development etc., the Board recommended the payment of a final dividend of RMB0.148 per share for the year ended 31 December 2019. Going forward, the Company will continue to strive for enhancing its profitability and shareholders' return.
In 2020, the Company will commit itself to the strategy of focus, innovation and cooperation and firmly promote the comprehensive Internet-oriented operation. Mixed-ownership reform will be further advanced as we pursue the goals of "enhance value, pursue growth, solidify fundamentals and be passionate", leading to a new page of high-quality development. Our priorities include:
  • To focus on value creation, accelerate the transformation of consumer market products, expedite the quality and transformation of channels and speed up the improvement of customer operation capability to achieve stable and high-quality development of fundamental businesses.
  • To advance the scale and return of innovative businesses by speeding up the improvement of operation capability of the government and enterprise market, placing the focus on the advancement of core capabilities for innovative businesses such as cloud computing, big data and Internet of Things and continuing to deepen strategic and ecological cooperation.
  • To accelerate the building of network leadership, actively leverage the advantages of the "co-build and co-share" of 5G network and LTE 900MHz frequency, focus on the user experience, effectively promote the deployment of 5G premium network, improve the depth and breadth of 4G network coverage, optimise resources allocation, and improve network utilisation rate.
  • To enhance our centralised IT support capability, improve customer service experience, deepen the innovation and reform of system and mechanism, strengthen fundamental management and risk management, as well as continuously improve our corporate governance capabilities, and thereby, creating greater value for shareholders.
The Company made ongoing effort to deepen the innovation and reform of system and mechanism. The Company continued to streamline the organisations with corporate structure further simplified at provincial and city levels. Progress was further achieved in sub-division reform of all production units, where a total of 24,000 mini-CEOs were selected. The Company continued to strengthen the talent pipeline and introduced more than 7,000 talents in innovative business. Market-oriented incentive mechanism reform was advanced with a strengthened incremental return sharing mechanism. Approval for unlocking of the first tranche of Phase 1 China Unicom A Share Company employee restricted share incentive scheme was successfully obtained. The mixed-ownership reform of subordinate companies was further deepened. Following the implementation of the socialised operational cooperation for the entire province at Yunnan Branch, operation in 7 cities of Guangxi Branch followed suit. Smart Steps introduced JD Digits as a strategic investor. Smart Connection Technology, a subsidiary of the Company, successfully introduced 9 strategic investors including FAW, Dongfeng Motor and GAC. With the continuous reform of the system and mechanism, the Company saw boosted corporate vibrancy and significantly enhanced operational efficiency.
Last updated: 27 April 2020