Key Takeaways From China Unicom’s 2016 Results

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China Unicom

China Unicom (NYSE:CHU), the second largest Chinese wireless carrier, published its Q4 and full year 2016 results on Wednesday. Below, we take a look at some of the key metrics and trends from the earnings release.

CHU_2016_1

  • China Unicom’s revenues trended lower, on account of declines in the firm’s equipment, voice and value added services revenue.
  • Moreover, the depreciation of the RMB versus the U.S. dollar also hurt dollar results.
  • However, this was partially offset by stronger wireless and fixed-line data traffic.

CHU_2016_2

  • The carrier’s subscriber base expanded by 4.6% year-over-year on account of an increasing 4G footprint and its network upgrade.
  • ARPU remained almost flat despite the higher mix of 4G customers, on account of a 13% decline in 4G ARPU.
  • 4G ARPU saw a decline due to the government’s tariff reduction requirement and the unused data carry forward policy.
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CHU_2016_3

  • China Unicom’s profits saw a sharp decline through 2016 on account of higher network and support expenses, as this was the first full year that the company had to pay tower usage fees towards the China Tower JV.
  • Moreover, the decline in depreciation costs associated with transferring its tower assets to China Tower were largely offset by its move to expand its network.
  • That said, network and support expenses could moderate going forward, as an increasing tower sharing ratio helps to cut tower costs and also as the company strengthens its base station collaboration with China Telecom.

CHU_2016_4

  • Capex in lower growth areas such as 2G/3G, fixed line has been cut
  •  4G capex will decline as the firm intends to add a total of 150k base stations, compared to 340k last year.
  • The company’s network sharing agreement with China Telecom could also potentially reduce outlays

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