中国联通(00762) - 2019 - 年度财报

Company Profile Company Profile China Unicom (Hong Kong) is a major integrated telecom operator in China, offering comprehensive services and serving approximately 318 million mobile subscribers by 2019-end Subscriber Scale as of End 2019 | Subscriber Type | Quantity | | :--- | :--- | | Total Mobile Billing Subscribers | Approx. 318 million | | Of which: 4G Subscribers | Approx. 254 million | | Fixed-line Broadband Subscribers | Approx. 83 million | | Fixed-line Local Telephone Subscribers | Approx. 54 million | - The ultimate parent company, China United Network Communications Group Co., Ltd. (Unicom Group), beneficially owns 52.1% of the company's shares through its subsidiaries, with the remaining shares held by strategic investors, employees, and public shareholders[17] Financial and Operational Highlights Key Financial and Operational Indicators In 2019, operating revenue was stable, service revenue slightly increased, and net profit grew 11.1%, driven by cost control and industrial internet business 2019 Key Financial Indicators | Key Financial Indicator | 2019 | 2018 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Operating Revenue (RMB billion) | 290.51 | 290.88 | -0.1% | | Of which: Service Revenue | 264.39 | 263.68 | 0.3% | | EBITDA (RMB billion) | 94.36 | 84.91 | 11.1% | | Net Profit (RMB billion) | 11.33 | 10.20 | 11.1% | | Basic Earnings Per Share (RMB) | 0.370 | 0.333 | 11.1% | | Free Cash Flow (RMB billion) | 26.4 | 47.5 | -44.5% | - Revenue from industrial internet business continuously increased its proportion of total service revenue from 6.4% in 2017 and 8.7% in 2018 to 12.4% in 2019, becoming a significant driver for stable service revenue[22] 2019 Milestones In 2019, the company advanced mixed-ownership reform and 5G strategic deployment, including strategic investments in subsidiaries and a 5G network co-build agreement - Vehicle networking subsidiary Unicom Smart Network Technology introduced 9 strategic investors including FAW, Dongfeng, and GAC; Big Data company Smart Footprint introduced JD Digital Technology as a strategic investor[27] - Signed a 5G network co-build and share agreement with China Telecom to jointly build a 5G access network nationwide[28] - Yunnan Unicom expanded socialized operation cooperation to the entire province, marking the official implementation phase of provincial-level mixed-ownership reform[30] Chairman's Report Overall Performance Despite challenges, the company rapidly improved profitability in 2019, with service revenue growing 0.3% and net profit 11.1%, maintaining strong financials 2019 Overall Performance Summary | Indicator | Amount (RMB) | Year-on-Year Change | | :--- | :--- | :--- | | Service Revenue | 264.4 billion | +0.3% | | EBITDA | 94.4 billion | +11.1% | | Net Profit | 11.3 billion | +11.1% | | Capital Expenditure | 56.4 billion | - | | Free Cash Flow | 26.4 billion | - | | Proposed Final Dividend | 0.148 per share | +10.4% | - The company's asset-liability ratio decreased to 39.3%, a 2.5 percentage point reduction year-on-year, indicating a more robust financial position[32] Business Development The company shifted mobile business focus to quality, saw fixed-line revenue grow 9.7%, and achieved significant growth in innovative businesses - Mobile business development shifted from "quantity growth" to "quality improvement," with mobile service revenue decreasing by 5.3% to RMB 156.4 billion, and 4G users reaching 254 million, accounting for 80% of total mobile billing users[32][34] - Fixed-line broadband users increased by 2.6 million, totaling 83.48 million, with integrated service penetration reaching 59%, an 8 percentage point increase year-on-year[34] Innovation and Fixed-line Business Revenue | Business Segment | Revenue (RMB billion) | Year-on-Year Growth | | :--- | :--- | :--- | | Industrial Internet | 32.9 | 43% | | Fixed-line Services | 105.7 | 9.7% | Network Construction The company innovatively collaborated on 5G network co-building, saving capital expenditure and doubling capacity, while advancing 4G and fixed-line networks - Co-built and shared 5G network with China Telecom, activating 50,000 shared 5G base stations, saving approximately RMB 10 billion in investment costs, and doubling network coverage, bandwidth, capacity, and speed[37] - Total 4G base stations reached 1.41 million, including 240,000 LTE 900MHz base stations, enhancing deep and rural coverage capabilities[38] - FTTH users accounted for 85% of fixed-line broadband users[38] Mixed-Ownership Reform The company deepened mixed-ownership reform, enhancing strategic investor collaborations and internal mechanism reforms, boosting vitality and efficiency - Continued cooperation with Alibaba, Tencent, Baidu in public cloud and cloud networking; jointly established a smart cultural tourism company with Tencent; joint venture Smart Footprint successfully introduced investment from JD Digital Technology[39] - Deepened institutional and mechanism reforms, with 24,000 "small CEOs" appointed and over 7,000 talents introduced in innovative fields[40] - Subsidiary mixed-ownership reform progressed, with Smart Network Technology successfully introducing 9 strategic investors including FAW, Dongfeng Motor, and GAC[40] Social Responsibility and Corporate Governance The company actively fulfills social responsibilities, implements national strategies, promotes 5G, and improves governance, earning multiple accolades - In response to the COVID-19 pandemic, the company utilized big data, AI, and 5G technologies for precise prevention and control, and accelerated its internet-based operational transformation[40] - Corporate governance received market recognition, winning awards such as "Asia's Best Managed Telecom Company" by FinanceAsia and "Asia's Most Admired Telecom Company" by Institutional Investor[40] Future Outlook For 2020, despite challenges, the company will focus on innovation, internet-based operations, and mixed-ownership reform for high-quality development - The company will adhere to its innovation and cooperation strategy, steadily advance comprehensive internet-based operations, and deepen mixed-ownership reform[42] - Development goals are "enhance value, seek development, strengthen foundation, and foster passion," focusing on improving basic services, innovative businesses, network competitiveness, and IT support capabilities[42] Business Overview Mobile Business In 2019, the company deepened its focus strategy and promoted internet-based market operations, with mobile billing subscribers reaching 320 million and mobile internet traffic growing 46% year-on-year 2019 Mobile Business Key Data | Indicator | Value | | :--- | :--- | | Total Billing Subscribers | 320 million | | 4G Billing Subscribers | 250 million | | User ARPU | RMB 40.4 | | Mobile Internet Traffic | 30.16 million TB | | Mobile Internet Traffic Year-on-Year Growth | 46% | Fixed-line Broadband The company strengthened fixed-line broadband integration; despite a full-year revenue decline, Q4 revenue and ARPU rebounded, with users reaching 83.48 million 2019 Fixed-line Broadband Key Data | Indicator | Value | | :--- | :--- | | Total Broadband Subscribers | 83.48 million | | Net Increase for the Year | 2.6 million | | Broadband User Access ARPU | RMB 41.6 | | FTTH User Penetration | 85% | - Despite a 1.7% year-on-year decrease in full-year fixed-line broadband revenue, fourth-quarter broadband access revenue and ARPU showed a rebound[45] Industrial Internet Industrial internet business achieved high-speed growth, becoming a significant revenue driver, with cloud computing and big data showing strong increases 2019 Industrial Internet Revenue and Growth by Segment | Business Segment | Revenue (RMB billion) | Year-on-Year Growth | | :--- | :--- | :--- | | Cloud Computing | 2.36 | 147% | | Big Data | 1.23 | 103% | | IoT | 3.04 | 46% | | IT Services | 10.0 | 78% | - IoT connections approached 190 million[45] Network Capability and Capital Expenditure The company built high-quality networks, with 4G base stations reaching 1.41 million and 5G base stations exceeding 60,000, with planned 2020 capex of RMB 70 billion - By the end of 2019, 4G base stations reached 1.41 million, and 4G population coverage reached 93%[45] - Total capital expenditure in 2019 was approximately RMB 56.4 billion; estimated capital expenditure for 2020 is approximately RMB 70 billion, with approximately RMB 35 billion allocated to 5G network capital expenditure[46][47] Marketing and Customer Service The company reshaped its brand, launched 5G branding, and improved customer service reputation with a 50% decrease in effective complaints - Launched the 5G brand logo "5Gn" and slogan "Let the Future Grow" to enhance brand recognition[47] - Customer service reputation continuously improved, with mobile network customer NPS increasing by 7.2 points and fixed-line by 8.1 points in Q4 year-on-year; effective complaint rate to MIIT decreased by 50% year-on-year[49] Financial Overview Financial Summary In 2019, operating revenue slightly decreased, service revenue slightly increased, and net profit grew to RMB 11.33 billion, impacted by IFRS 16 adoption 2019 Financial Data Overview | Indicator | Amount (RMB billion) | | :--- | :--- | | Operating Revenue | 290.51 | | Service Revenue | 264.39 | | Net Profit | 11.33 | | Net Cash Flow from Operating Activities | 93.68 | | Capital Expenditure | 56.42 | | Asset-Liability Ratio | 43.0% | - The company adopted International Financial Reporting Standard 16 (IFRS 16) from January 1, 2019, leading to an increase in depreciation and amortization and finance costs, while lease expenses within network, operation, and support costs decreased accordingly[50] Operating Revenue Composition In 2019, service revenue grew 0.3%, with revenue structure optimizing as non-voice business revenue increased to 85.07% of total 2019 Service Revenue Composition | Revenue Type | Amount (RMB billion) | Percentage of Service Revenue | 2018 Percentage | | :--- | :--- | :--- | :--- | | Total Service Revenue | 264.39 | 100.00% | 100.00% | | Voice Business | 39.48 | 14.93% | 17.47% | | Non-Voice Business | 224.91 | 85.07% | 82.53% | Cost and Expense Analysis In 2019, total costs slightly decreased, with depreciation increasing due to new leasing standards, while network costs decreased and other expenses rose 2019 Key Cost and Expense Items | Cost and Expense Item | 2019 (RMB billion) | Year-on-Year Change | | :--- | :--- | :--- | | Total Costs and Expenses | 276.35 | -0.5% | | Depreciation and Amortization | 83.08 | +9.6% | | Network, Operation and Support Costs | 43.24 | -21.5% | | Employee Compensation and Benefits | 50.52 | +4.9% | | Selling Expenses | 33.54 | -4.6% | | Other Operating and Administrative Expenses | 30.95 | +12.9% | - The increase in depreciation and amortization and finance costs, and the decrease in network, operation, and support costs, are primarily due to the implementation of the new leasing standard[58] Profitability, Capital Expenditure, and Cash Flow Profitability improved, with EBITDA growing 11.1% and net profit reaching RMB 11.33 billion, while capital expenditure was RMB 56.42 billion 2019 Profitability and Cash Flow | Indicator | Amount (RMB billion) | Year-on-Year Change | | :--- | :--- | :--- | | EBITDA | 94.36 | +11.1% | | Pre-tax Profit | 14.17 | +8.3% | | Net Profit | 11.33 | +11.1% | | Net Cash Flow from Operating Activities | 93.68 | - | | Free Cash Flow | 37.26 | - | 2019 Capital Expenditure Composition | Capital Expenditure Item | Amount (RMB billion) | Percentage | | :--- | :--- | :--- | | Total | 56.42 | 100.00% | | Mobile Network | 29.65 | 52.54% | | Broadband and Data | 8.43 | 14.94% | | Infrastructure and Transmission Network | 11.42 | 20.23% | | Other | 6.92 | 12.29% | Asset and Liability Status As of 2019-end, total assets increased 4.1%, total liabilities 6.9%, and total equity 2.1%, maintaining a robust financial position despite IFRS 16 impact - Due to the implementation of the new leasing standard, the asset-liability ratio changed from 41.8% to 43.0%, and the debt-to-capital ratio changed from 11.3% to 15.2%[61] - As of the end of 2019, the net debt-to-capital ratio was 5.9%[61] Directors and Senior Management Directors and Senior Management Profiles This section details the background of the company's board members and senior management, highlighting their extensive industry experience - Mr. Wang Xiaochu, aged 61, has served as the company's Chairman and CEO since September 2015, possessing extensive management and telecommunications industry experience[63] - Mr. Zhu Kebing, aged 45, has served as the company's Executive Director and CFO since August 2018, possessing rich experience in corporate finance and investment management[69] Corporate Governance Report Board of Directors The Board maintains high corporate governance standards with a diverse composition, regularly reviews significant matters, and earned multiple international accolades in 2019 - The Board of Directors consists of 9 members, including 4 executive directors, 1 non-executive director, and 4 independent non-executive directors, with diverse backgrounds[87] - In 2019, the company received multiple governance awards, including "Asia's Most Admired Telecom Company No. 1" by Institutional Investor and "Asia's Best Managed Telecom Company No. 1" by FinanceAsia[86] - In 2019, the Board held four meetings and completed one written resolution, discussing important matters such as annual results, budget, and continuing connected transactions[93] Board Committees The Board has Audit, Remuneration, and Nomination Committees, all chaired by independent non-executive directors, which oversee financial reporting, remuneration policies, and board structure, effectively supporting board decisions Audit Committee The Audit Committee oversees independent auditors, reviews financial statements, and discusses risk management and internal control systems, ensuring financial report integrity - The Audit Committee is composed of four independent non-executive directors, responsible for overseeing independent auditors, reviewing financial statements, risk management, and internal control systems[97][98] Remuneration Committee The Remuneration Committee advises the Board on remuneration policies for directors and senior management, and reviews and approves management's remuneration proposals - The Remuneration Committee is composed of three independent non-executive directors, responsible for advising the Board on remuneration policies and structures for directors and senior management[98][99] Nomination Committee The Nomination Committee reviews board structure, identifies suitable director candidates, and recommends appointments, ensuring board composition and independence - The Nomination Committee is responsible for reviewing the Board's structure, identifying director candidates, and implementing the Board diversity policy[99][101] Risk Management and Internal Control The company maintains a group-wide risk management and internal control system, with the Board responsible for its effectiveness, addressing key risks - The company has established a comprehensive risk management and internal control system comprising the Board of Directors, Internal Control and Risk Management Committee, integrated management departments, and various professional functional departments[104] - Significant risks identified in 2019 include: macroeconomic and market competition risks, industry regulatory policy change risks, technology upgrade risks, and interest and exchange rate risks[107] - The Board of Directors has conducted an annual review of the risk management and internal control system for the financial year ended December 31, 2019, and deemed it effective and adequate[110] Corporate Transparency and Investor Relations To enhance transparency, the company provides quarterly financial and monthly operational data, maintaining active communication with the capital market - The company discloses unaudited financial information quarterly and key operational data monthly to enhance information transparency[112] - In 2019, the company actively participated in over 30 investor conferences organized by investment banks such as UBS, Morgan Stanley, and Credit Suisse[114] - Investor relations work received recognition, winning awards such as "Best Company in Telecommunications Sector" and "Best Senior Management Team" at the "2019 IR Magazine Greater China Awards"[115] Directors' Report Performance and Dividends The Board reported 2019 operating results and recommended a final dividend of RMB 0.148 per share, totaling approximately RMB 4.529 billion - The Board of Directors recommended a final dividend of RMB 0.148 per share, totaling approximately RMB 4.529 billion, for the year ended December 31, 2019[121] Share Option Scheme and Major Shareholders The company adopted a 10-year share option scheme in 2014 for talent retention, with no options granted; Unicom Group is the ultimate controlling shareholder - The company adopted a share option scheme in 2014, valid until April 22, 2024; no share options have been granted since its adoption[124][126] - The ultimate controlling shareholder, Unicom Group, indirectly holds 24,683,896,309 ordinary shares of the company, representing 80.67% of the issued share capital[130] Continuing Connected Transactions The report details continuing connected transactions with Unicom Group, based on a comprehensive service agreement, confirmed by independent directors and auditors - The company entered into a 2017-2019 comprehensive service agreement with its controlling shareholder, Unicom Group, covering nine categories of continuing connected transactions, including telecommunications resource leasing, property leasing, material procurement, engineering services, and financial services[138] 2019 Major Continuing Connected Transaction Amounts | Transaction Type | Expenditure/Revenue (RMB billion) | | :--- | :--- | | Terminal Telecom Services Expenditure | 2.417 | | Engineering Design and Construction Services Expenditure | 1.537 | | Comprehensive Services Expenditure | 1.052 | | Short-term Property Lease and Related Services Expenditure | 0.989 | - Independent non-executive directors and independent auditors confirmed that all continuing connected transactions were conducted in the ordinary course of business on fair and reasonable commercial terms, in the overall interest of shareholders, and did not exceed the annual caps[146] Human Resources Development Human Resources Development The company deepened human resource reforms focusing on flexible management, achieving RMB 1.05 million per person in labor productivity in 2019 - In 2019, labor productivity reached RMB 1.05 million per person[157] - Strengthened talent pipeline development, establishing a four-tier talent pool of leaders, experts, key personnel, and new recruits totaling 15,000; the total number of technical talents in innovative fields such as IT and government/enterprise reached 21,000, an increase of 5,000 from the end of 2018[157] Social Responsibility Social Responsibility The company integrates its development with social responsibility, actively implementing national strategies as a pioneer in SOE reform and a main force in network infrastructure - As the first group-wide mixed-ownership reform enterprise, it deepens the implementation of the mixed-ownership reform policy of "improving governance, strengthening incentives, focusing on main business, and enhancing efficiency"[161] - Actively engaged in social welfare, vigorously carrying out emergency communication support, targeted poverty alleviation, charitable donations, and fully supporting COVID-19 epidemic prevention and control efforts[161] - In 2019, RMB 104 million was invested in special funds for energy conservation and emission reduction, promoting low-carbon technologies, with energy-saving technology coverage exceeding 70%[164] Consolidated Financial Statements Independent Auditor's Report KPMG issued an unqualified opinion on the 2019 consolidated financial statements, confirming fair reflection under IFRS and HKFRS, with key audit matters identified - The auditor issued an unqualified opinion, stating that the consolidated financial statements fairly and truly reflect the Group's financial position and operating results in accordance with applicable accounting standards[172] - Key audit matters were "revenue recognition" and "carrying amount of property, plant and equipment," primarily due to complex billing systems, significant management judgment, and their materiality to the financial statements[174][183][185] Consolidated Income Statement In 2019, operating revenue slightly decreased, while pre-tax profit grew 8.3% and net profit attributable to equity holders increased 11.1% 2019 Consolidated Income Statement Summary | Item (RMB million) | 2019 | 2018 | | :--- | :--- | :--- | | Revenue | 290,515 | 290,877 | | Pre-tax Profit | 14,167 | 13,081 | | Profit for the Year | 11,372 | 10,257 | | Profit Attributable to Equity Holders of the Company | 11,330 | 10,197 | | Basic Earnings Per Share (RMB) | 0.37 | 0.33 | Consolidated Statement of Financial Position As of 2019-end, total assets increased 4.1%, total liabilities 6.9%, and total equity 2.1%, maintaining a robust financial position 2019 Consolidated Statement of Financial Position Summary | Item (RMB million) | December 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Assets | 562,499 | 540,320 | | Total Liabilities | 241,744 | 226,034 | | Total Equity | 320,755 | 314,286 | | Net Current Liabilities | (121,595) | (139,001) | Consolidated Cash Flow Statement In 2019, net cash inflow from operating activities was RMB 93.68 billion, with net cash outflows from investing and financing activities 2019 Consolidated Cash Flow Statement Summary | Item (RMB million) | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash Inflow from Operating Activities | 93,678 | 92,387 | | Net Cash Outflow from Investing Activities | (59,053) | (61,179) | | Net Cash Outflow from Financing Activities | (29,765) | (34,058) | | Net Increase/(Decrease) in Cash and Cash Equivalents | 4,860 | (2,850) | | Cash and Cash Equivalents at Year-End | 34,945 | 30,060 | Financial Highlights Five-Year Financial Highlights This summary shows revenue stabilization post-2017, significant profitability improvement, stable total assets, and reduced liabilities post-2017 mixed-ownership reform 2015-2019 Key Financial Data Summary (RMB million) | Indicator | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 290,515 | 290,877 | 274,829 | 274,197 | 277,049 | | Pre-tax Profit | 14,167 | 13,081 | 2,593 | 784 | 14,035 | | Profit Attributable to Equity Holders of the Company | 11,330 | 10,197 | 1,828 | 625 | 10,562 | | Total Assets | 562,499 | 540,320 | 571,983 | 614,154 | 610,346 | | Total Liabilities | 241,744 | 226,034 | 267,636 | 386,472 | 379,130 | | Total Equity | 320,755 | 314,286 | 304,347 | 227,682 | 231,216 |