China Unicom profit jumps to 10.2b yuan

Finance | Reuters, Bloomberg and Avery Chen 14 Mar 2019

Chinese telecom operator China Unicom (Hong Kong)'s (0762) reported a five-fold jump in 2018 net profit, beating estimates, which it attributed to a mixed-ownership reform.

Net profit for the year jumped to 10.2 billion yuan (HK$11.93 billion) from 1.83 billion yuan in 2017 while 15 analysts polled by Refinitiv had an average forecast of 8.5 billion yuan.

A final dividend of 13.4 fen per share was declared, basic earnings per share were 33 fen.

Total revenue for the full year rose 5.8 percent to 291 billion yuan, against the average estimate of 287 billion yuan by 21 analysts on Refinitiv.

Service revenue rose 5.9 percent to 263.7 billion yuan, and mobile service revenue climbed 5.5 percent to 165.1 billion yuan. Mobile billing subscribers saw a 51.8 percent increase to 320 million.

The share of net profit of China Tower (0788), which listed in the main board last August, increased by 1.47 billion yuan, accounting for under equity method.

China Unicom planned a budget of 58 billion yuan for capital expenditure this year, chairman and chief executive Wang Xiaochu said, about 6 billion yuan to 8 billion yuan capital expenditure will be used for 5G, as the next-generation wireless network "was just getting started this year and the firm needs to continue trials and explore its business models."

Shares of China Unicom slid 0.82 percent to HK$9.63 yesterday.

Meanwhile, Chinese telecom equipment maker ZTE's (0763) controlling shareholder plans to reduce its stake by as much as 3 percent after the stock more than doubled in value since surviving a U.S. sanction last year, showed regulatory filings late on Tuesday.

Shares of ZTE slumped 7.4 percent to HK$23.15 yesterday.

Other 5G related stocks also fell, Yangtze Optical Fibre and Cable Joint Stock (6869) sank 9.45 percent to HK$22.05, while Comba Telecom Systems (2342), which doesn't even make cables, lost 6.6 percent.

Buying Chinese stocks related to 5G is no longer a slam dunk as competition to supply China's telecom giants has become so intense that cable makers are battling a severe price war that caught investors off guard.

Instead of the earnings windfall that many were hoping for, profit margins will likely be squeezed.

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