China Unicom (CHU) misses profit estimates, stock up slightly in HK, investors await restructuring (FY 2004 earnings)

Includes: CHA, CHL, CHU, CN-OLD
by: Ezra Marbach

China wireless operator, China Unicom (ticker: CHU) announced (WSJ subscription required) 2004 results today. The company missed net profit estimates. We already know that subscriber growth is weak. Rumors abound of a government imposed Unicom break-up. More details here:

2004 financial results:
(all percentage changes and comparisons are year over year, unless stated otherwise)

  • Revenue increased 17% to RMB 79.33 billion.
  • EBITDA increased 8.5% to RMB 27.02 billion.
  • Net profit increased 4.0% to RMB 4.39 billion.
  • Analysts estimated net profit of RMB 5.18 billion.
  • Earnings per share of RMB 0.349,
    up from RMB 0.336.

Revenue breakdown:

  • Revenue from GSM subs increased 15.3% to RMB 47.47 billion.
  • Revenue from CDMA subs increased 41.8% to RMB 26.34 billion.
  • Revenue from the long distance communications, data communications and Internet business was RMB 5.53 billion.

2004 Subscriber growth:

  • Added 11.7 million to 84.3 million GSM subs.
  • Added 8.9 million to 27.8 CDMA subs.
  • Cellular subscribers increased 22.5% to 112.081 million cellular subscribers.

As of end of February 2005:

  • 86.1 million GSM subs.
  • 28.9 million CDMA subs.

As of December 31, 2004:

  • Company's market share was 35.6%.


  • The company proposed a final dividend of RMB 0.10, the same as in the prior year.

2005 Guidance:

  • Budgeted capital expenditure of 18.23 billion yuan, down from 18.39 billion yuan.

Chang Xiaobing, Chairman and Chief Executive Officer of the Company pointed out,

....the Company intends to accelerate the development of its CDMA business and optimize network utilization rates by capitalizing on the business and technological superiority of CDMA 1X.  Greater efforts will be made on the expansion of its industry-specific customers.  The coming year will also see China Unicom redouble its efforts to develop CDMA industry chain and overcome bottlenecks that have thus far held back the development of its CDMA business.  To ensure the continued stable development of its GSM business, the Company will continue its attempts to optimize the GSM network. This will involve an increased focus on strategies aimed at stabilizing existing customer loyalty levels.  The coming year will see China Unicom continue to place great emphasis on the development of its value-added cellular business and focus on the development of SMS and "uni" (broadband) to encourage growth in subscribers and revenue.

Quick thought: There is a lot of uncertainty regarding China Unicom. Reports suggest that a government restructuring will lead to a break-up of Unicom. Take a look at latest Unicom developments here.

China Unicom's stock market performance:


China Unicom's stock market performance relative to rival Chinese wireless operator China Mobile (ticker: CHL). China Unicom in green, China Mobile in orange: