Unicom's reform progress may encourage other SOEs to follow suit

As China United Network Communications Group Co Ltd presses ahead with its 78 billion yuan ($12.3 billion) mixed-ownership reform, its progress is likely to encourage other State-owned enterprises to follow suit, experts said.

Li Jin, chief researcher at the China Enterprise Research Institute, said the brave steps by China Unicom to partner with private internet heavyweights set a good example for other SOEs eager to embrace changes.

"The influx of tech giants can help complement China Unicom's current business and it is also good for the country's second largest telecom carrier by subscribers to move upward in the industry chain," Li said.

China Unicom said in August 2017 that it had attracted industry behemoths including Alibaba Group Holding Ltd, Tencent Holdings Ltd, Baidu Inc and JD.com Inc as private investors.

Since then, the Beijing-based company has inked a series of deals with them in a wide range of areas, such as big data, cloud computing, the internet of things and smart electronic gadgets.

Xiang Anbo, a researcher at the Development Research Center of the State Council, said that despite their status as industry giants, these new investors, in fact, are relatively small shareholders of China Unicom, which is doing a good job to protect their rights.

Among China Unicom's 13 new board members elected in February, for instance, four are from the private sector, way beyond many people's expectations. One of them is Robin Li, CEO of Baidu, China's largest online search engine company and a pioneer in artificial intelligence technology.

Moreover, China Unicom made big efforts to streamline its organization, cut redundant departments and boost efficiency.

Wang Xiaochu, chairman of the State-owned company, said at a board meeting in February that overhauling corporate structure is one of the reform's top priorities.

"We started with our Beijing headquarters, where the number of departments has been slashed from 27 to 18," Wang said.

To live up to the promise of incentivizing employees with stock rewards, China Unicom has also compiled a list of more than 7,000 staff, including mid-level managers, senior executives and professionals, who will be rewarded with about 800 million shares.

When the reform goes through, employees will account for 2.7 per-cent of the company's total shares, while shares owned by the group will plummet to 36.7 percent from 62.7 percent.

Gao Xudong, a researcher at Tsinghua University, said handing out employee stock rewards is a big bright spot in China Unicom's reform, which can be seen as a test case for the country's pan-SOE makeover.

"In fact, more SOEs can try this approach to motivate staff on the premise that State-owned assets are well protected. After all, their salaries are well below the market average at the moment," Gao said.