March 16, 2018 / 8:25 AM / 2 years ago

China Unicom aims to reap rewards from ties to new shareholders

FILE PHOTO: Company logos of China Unicom are displayed at a news conference during the company's announcement of its annual results in Hong Kong, China March 16, 2016. REUTERS/Bobby Yip/File Photo

HONG KONG (Reuters) - Telecoms group China Unicom plans to lean on some of China’s biggest technology and financial firms who have recently become its shareholders to drive compounded annual pre-tax profit growth of 68.7 percent through 2020 at its Shanghai-listed unit.

State-controlled China Unicom, formally known as China United Network Communications Group Co Ltd, is the nation’s second biggest telecoms carrier by subscriber numbers but has lagged its rivals China Mobile (0941.HK) and China Telecom (0728.HK) in delivering steady profit growth.

As part of Beijing’s push for state-owned enterprises to be revitalized with private capital, the Shanghai-listed unit, China United Network Communications (600050.SS), made a $12 billion private placement to firms including Alibaba (BABA.N), Tencent (0700.HK) and China Life (601628.SS), who have become its new shareholders and board members.

It is through collaborations with its new partners that China Unicom hopes to achieve its profit goals. Chairman Wang Xiaochu told a media briefing in Hong Kong on Thursday China Unicom will cooperate with its new shareholders in cloud services, e-commerce, video content, as well as developing new businesses such as connected vehicles.

The Shanghai-listed unit aims to grow its pre-tax profit to 25.35 billion yuan ($4.01 billion) in 2020 as part of an employee share incentive scheme, he said. It is targeting growing its service revenue at a compounded annual rate of 6.5 percent to 301.1 billion yuan in 2020.

Since August, around 15 percent of mid-level management positions at the group have been eliminated, he said. “We will continue to streamline our operations every year,” he said.

The Shanghai-listed unit posted a net profit of 425.8 million yuan for 2017, up 176 percent.

China Unicom Hong Kong (0762.HK), an indirect subsidiary of the Shanghai entity, reported on Thursday a 193 percent rise in net profit to 1.83 billion yuan. It also declared a dividend of 0.052 yuan per share after paying none in the previous year.

China Unicom Hong Kong said its capital expenditure in 2018 is expected to be no more than 50 billion yuan, compared with 42.1 billion yuan in 2017, as it starts investing in 5G.

Reporting by Sijia Jiang; Editing by David Evans and Muralikumar Anantharaman

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