Unicom posts lower profit, sales

Performance comes amid fierce competition among domestic telcos

HONG KONG - State-owned China Unicom Hong Kong Ltd reported a drop in revenue and profit for 2016 due to a huge investment in 4G and broadband network infrastructure, amid fierce competition among domestic telecom heavyweights.

The group said on Wednesday its net profit last year fell 94 percent to 630 million yuan ($91.15 million), matching an estimate it disclosed in January. Revenue fell 1 percent to 274.20 billion yuan.

China Unicom added that it would not pay a dividend for 2016. The telco, whose 4G subscribers passed the 100 million mark by the end of 2016, is bracing for further challenges this year after the government called on the three major telecom carriers to lower rates.

Premier Li Keqiang last week called on telcos to "raise speeds, drop prices" by evening out local and long-distance domestic call charges and removing domestic roaming charges. The impact could see China Unicom booking a net loss of about $103 million in 2017, estimated analysts at Jefferies.

China Unicom said at an earnings briefing on Wednesday that eliminating roaming charges would reduce its revenue by 1.58 billion yuan per quarter.

The telco blamed the performance decline on additional operating and support expenses after disposing of network signal towers, as well as a substantial increase in sales and marketing costs.

"We are determined to improve quality and enhance efficiency, eliminate excess capacity and destock," China Unicom said in a statement to Hong Kong's stock exchange.

The telco's capital expenditure in 2017 will drop 38 percent from last year to 45 billion yuan as the company needs time to prepare for 5G spending and ensure it does not repeat the mistakes it made with 4G, Chairman Wang Xiaochu said at the earnings briefing.

The company has racked up heavy expenses to market its fourth-generation (4G) mobile network technology, weighing significantly on its bottom line.

Last year "was an expensive year for China Unicom to catch up on its missed opportunities in 4G", said Nomura analyst Joel Ying.

Wang said China Unicom aimed to add 60 million 4G users in 2017, the same number as in 2016.

Wang also said a pilot mixed-ownership program for State-owned enterprises, in which China Unicom will be among the first to take part, is pending government approval so he was unable to provide an update on the matter.

China's three State-owned telecom operators transferred their tower assets into a joint venture, China Tower Corp, in October 2015 as the government worked to improve efficiency.

Reuters-China Daily