) announced the results for full-year 2012 with adjusted net
income of RMB 7.1 billion ($1.12 billion) that surged 67.9% over
the year-earlier period on the back of strong revenue growth and
higher adoption of the 3G plan.
Revenue & Subscriber
Total revenue (excluding deferred fixed-line upfront
connection fee) climbed 19.0% year over year to RMB 248.9 billion
($38.53 billion) but remained below the Zacks Consensus Estimate
of $40.23 billion.
Telecommunication service revenues, comprising roughly 84% of
the total revenue, were RMB 210.13 billion ($33.28 billion), up
13% from the year-ago period.
Healthy revenue growth was attributable to rapid growth of the
3G and fixed-line broadband businesses as well as strong sales of
) iPhones in spite of losing the exclusive right to distribute
China Telecom Corp.
) last year.
Total revenue from the mobile business increased 30.0% year
over year to RMB 164.77 billion ($26.10 billion). A large
contributor to the growth was the telecommunication service with
revenues of RMB 126.04 billion ($19.96 billion), up 22.0 % year
over year. China Unicom added 46,974 million new subscribers to
reach 395.1924 million at the end of 2012.
China Unicom's 3G business is growing at a fast pace since its
introduction in Oct 2009 and has become the major driver of
revenue growth. 3G business telecommunication service revenues
were RMB 59.80 billion ($9.47 billion) in 2012, up 82.6% year
over year and accounted for 28.5% of telecommunication service
revenues. The company's total 3G subscriber base reached 76.456
million, with 36.437 million new customers added in 2012.
Telecommunication service revenue from the GSM business fell
6.1% year over year to RMB 66.24 billion ($10.49 billion) due to
growing data substitution and stiff competition. Subscriber
addition increased 2.0% year over year to 162.856 million at the
end of 2012.
Revenue from the fixed-line business inched up 1.9% year over
year to RMB 83.28 billion ($13.19 billion). Telecommunications
services revenue from the fixed-line business also rose 1.9% year
over year to RMB 83.21 billion ($13.18 billion) backed by
consistent growth in fixed-line broadband business.
Telecommunications service revenues from the broadband
business was RMB 39.37 billion ($6.24 billion), up 11.8% from the
year-ago period. China Unicom added 8.218 million customers
during the reported year, bringing the total number to 63.869
Total expenses crept up 17.6% year over year to RMB 239.41
billion ($37.92 billion) due to higher selling expenses, network
deployment costs, interconnection charges and depreciation
charges. Selling and marketing expenses increased 21.9% year over
year to RMB 35.04 billion ($5.6 billion) in 2012, mostly due to
higher promotional spending on handsets and applications.
China Unicom exited 2012 with cash and cash equivalents of RMB
18.25 billion ($2.89 billion) compared with RMB 15.11 billion
($2.34 billion) at the end of fiscal 2011.
Operating cash flow grew 6.2% year over year to RMB 70.620
billion ($11.19 billion) in the reported period.
China Unicom will continue to benefit from the ongoing
development strategy aimed at enhancing its growth and
profitability. The company expects to generate higher revenues by
accelerating large-scale developments of 3G and fixed-line
Nevertheless, high levels of marketing and promotional
expenditures would continue to hurt future profitability.
Further, we remain concerned about the precipitous decline in the
landline business as well as intense competition in the domestic
wireless market, in particular from
) and China Telecom.
China Unicom retains a Zacks Rank #4 (Sell).
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