China Unicom has recently been in the spotlight due to its mixed-ownership reform, sparking widespread discussion among netizens about whether these reforms will truly help the company. Although the stock is currently suspended, the market competition remains intense. According to China Unicom's announcement regarding the suspension of its listed operations, the pilot program for mixed ownership reform has been approved by the National Development and Reform Commission. The company plans to introduce strategic investors through a non-public share issuance. But can this mixed-ownership reform be the key to reviving China Unicom?
The company announced that the application for a non-public offering of A-shares under its mixed reform plan was approved by the China Securities Regulatory Commission (CSRC). However, the official written approval has not yet been received, and China Unicom will make an official announcement once it is obtained.
On August 21, China Unicom disclosed its non-public offering plan, which was later approved by the shareholders’ meeting on September 20. The plan aims to raise up to 61.725 billion yuan through the non-public issuance of shares. Additionally, the transfer of old shares by Unicom Group involves 12.975 billion yuan.
At the end of September, during a press conference, Chairman Wang Xiaochu mentioned that all funds from the strategic investors involved in the mixed-ownership reform are expected to be in place by the end of the year.
It is understood that the 61.725 billion yuan raised through this non-public offering will be allocated to 4G, 5G, and innovative business projects. According to the document, the 4G capacity enhancement project has a total investment of 55.09 billion yuan, while the 5G network technology verification and related business enablement projects have a total investment of 27.1 billion yuan. The innovative business construction project is estimated to cost 3.213 billion yuan. In total, the three major areas are expected to require 85.403 billion yuan in future investments, with 39.816 billion yuan, 19.587 billion yuan, and 2.322 billion yuan coming from the current fundraising.
From the numbers, it’s clear that 4G investment makes up more than half of the total capital raised, showing the company’s strong focus on strengthening its 4G infrastructure.
Wang Xiaochu also emphasized that the transition from 2G to 4G and from 4G to 5G are different processes. Unlike 4G replacing 3G, 4G and 5G will coexist for some time. Therefore, 5G investment requires experimentation and patience. He estimated that 5G could reach commercial viability by 2020. Currently, China Unicom is mainly tracking developments and hasn’t started large-scale investment yet. He added that 5G communication still needs 2–3 years of maturity before full deployment, meaning that expanding the 4G network remains crucial for generating revenue.
Looking at China Unicom’s financial reports, it’s evident that 4G continues to drive growth. In the first half of 2017, the number of 4G subscribers increased by 34.26 million, reaching a total of 138 million. The proportion of 4G users among mobile subscribers rose by 23.7 percentage points year-on-year, reaching 51.5%. The average revenue per user (ARPU) for 4G users was 66.5 yuan, significantly higher than the overall ARPU of 48 yuan for all mobile users. Mobile Internet data traffic grew by 325.7% year-on-year, and mobile Internet revenue reached 42.9 billion yuan, with large-data packages driving much of this growth.
From a network coverage perspective, according to Guoxin Securities data, China Unicom still lags behind China Mobile and China Telecom in terms of 4G base station distribution. China Mobile accounts for 48% of 4G base stations, China Telecom 29%, and China Unicom only 23%.
With the rapid development of mobile internet and video services, the number and proportion of 4G users continue to rise, and mobile data consumption is growing rapidly. For China Unicom, continuous expansion and capacity enhancement of the 4G network is essential and cannot be delayed.
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