What To Watch As China Unicom Publishes Q1 Results
China Unicom (NYSE:CHU), the second largest Chinese wireless carrier, is expected to publish its Q1 2018 results in mid-April, reporting on what is typically the strongest quarter for Chinese carriers in terms of subscriber acquisition activity, on account of the Chinese New Year holiday. In this note, we take a look at some of the key trends to watch as the carrier reports its figures.
We have created an interactive dashboard analysis outlining our expectations for the company this year. You can modify the charts with blue dots to arrive at your own estimates for the company’s 2018 revenues.
Revenue Could Grow On Subscriber Adds, Growing 4G Mix
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China Unicom’s wireless business is likely to see a strong year-over-year improvement. Over the months of January and February (the most recent available data), the carrier added a total of 5.68 million mobile billing subscribers, which is almost three times the year-ago figure. The company’s mobile ARPU should also see an improvement on a sequential and year-over-year basis, driven by a higher mix of 4G subscribers in its user base. The 4G mix stood at 65% as of February 2018, compared to about 44% in the year-ago quarter and 62% in Q4 2017. China Unicom is targeting a compound annual growth rate of 6.5% in its service revenues, through the year 2020, projecting them to grow to about RMB 301.1 billion by 2020, and we will be watching the company’s progress in bolstering revenues this quarter.
Margins May Also See Some Expansion
The company’s margins could also see an improvement over the quarter, as handset subsidy costs have been on the decline. Moreover, SG&A expenses have also trended lower, as the company has been transforming its sales and marketing model to reduce its subscriber acquisition costs. Separately, the company is also looking to play a larger role in areas such as cloud services, e-commerce, and video content by leveraging its new equity investors who include Internet behemoths Alibaba and Tencent. We will be looking for updates from the company on this front.
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