Key Takeaways From China Unicom’s First-Half Earnings

by Trefis Team
China Unicom
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China Unicom (NYSE:CHU), the second largest Chinese wireless carrier, published its results for the first half of 2018 on Wednesday, reporting a stronger than expected set of results. While the company’s service revenues grew by 8.3% year-over-year for H1, driven by an expanding mobile subscriber base, net profits soared by 145% driven partly by tighter control on costs. Below we take a look at some of the trends that drove the company’s results.

Our interactive dashboard analysis on what lies ahead for China Unicom in 2018 details our expectations for the company through the rest of the year. You can modify any of our forecasts or key drivers to see the impact that changes would have on China Unicom’s results.

Mobile Subscriber Base Grows, But ARPU Remains Flat On Data Pricing Pressure

China Unicom added a total of about 18 million mobile subscribers over the first half of the year, driven by its 4G business and its new data packs that are targeted at heavy data users.  While the company lagged its smaller rival China Telecom, which added over 31 million users in the same period, its performance was about in line with larger rival China Mobile. The company’s 4G ARPU declined from 66.5 RMB ($9.60) in H1 2017 to RMB 56.6 ($8.20), on account of lower per-unit data prices, which more than offset soaring per-handset data usage (which was up 3x). However, overall ARPU remained about flat at RMB 48.0 ($6.96), on account of a higher mix of 4G subscribers.

Profits Expand On Lower Cost Base

The carrier has been transforming its sales and marketing model, reducing customer acquisition costs by stepping up online sales efforts, while also improving the quality of new subscribers. The company has also been using big data and analytics to better target customers and reduce costs. These efforts appear to be paying off, as the company’s sales and marketing expenses only rose by 2.4%year-over-year, while its mobile revenues grew by 9.7%. Separately, the company’s handset subsidy costs also declined by about 52% year-over-year to RMB 380 million ($ 55 million).

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