* 2016 net profit falls 94 percent to 630 million yuan
* Expects 2017 capex of 45 bln yuan vs 72.1 bln in 2016
* Chairman says govt's determination for reform is strong
(Adds chairman quotes from press conference)
By Sijia Jiang
HONG KONG, March 15 State-owned China Unicom
Hong Kong Ltd on Wednesday reported a drop in revenue
and profit for 2016, and is bracing for further challenges this
year as the Beijing government calls on telecommunications
network operators to lower rates.
Chinese Premier Li Keqiang last week called on telcos to
"raise speed, drop prices" by evening out local and
long-distance domestic call charges and removing domestic
roaming charges. The impact could see China Unicom booking a net
loss of about $103 million in 2017, estimated analysts at
China Unicom said at an earnings briefing on Wednesday that
eliminating roaming charges would reduce its revenue by 1.58
billion yuan per quarter.
For 2016, the company's net profit fell 94 percent to 630
million yuan ($91.15 million), matching an estimate it disclosed
in January. Revenue fell 1 percent to 274.20 billion yuan.
China Unicom said it would not pay a dividend for 2016.
The telco blamed the decline on additional operating and
support expenses after disposing of network signal towers, as
well as a substantial increase in sales and marketing costs.
"We are determined to improve quality and enhance
efficiency, eliminate excess capacity and de-stock based on the
practical situation," China Unicom said in a statement to Hong
Kong's stock exchange.
The telco's capital expenditure in 2017 will drop 38 percent
from last year to 45 billion yuan as the company needs time to
prepare for 5G spending and ensure it does not repeat the
mistakes it made with 4G, China Unicom Chairman Wang Xiaochu
said at the earnings briefing.
The company has racked up heavy expenses to market its
fourth-generation (4G) mobile network technology, weighing
significantly on its bottom line.
Last year "was an expensive year for China Unicom to catch
up on its missed opportunities in 4G", said Nomura analyst Joel
Chairman Wang said China Unicom aimed to add 60 million 4G
users in 2017, the same number as in 2016.
Wang also said a pilot mixed-ownership programme for
state-owned enterprises, in which China Unicom will be among the
first to take part, is pending government approval, and so he
was unable to provide an update on the matter.
"One thing that is for sure is the central government's
determination for reform is strong," he said.
China's three state-owned telecom operators transferred
their tower assets into a joint venture, China Tower Corp, in
October 2015 as the government worked to improve efficiency.
"The most important purpose of mixed ownership is to change
problems with the system ... that can greatly improve
efficiency," Wang said.
The proportion of 4G subscribers to mobile billing
subscribers rose 22.1 percentage points to 39.6 percent in 2016,
with the potential for growth still "enormous", the company
China Unicom's stock closed up 0.1 percent ahead of the
earnings announcement, versus a 0.2 percent drop for the
benchmark Hang Seng Index.
($1 = 6.9116 Chinese yuan renminbi)
(Reporting by Sijia Jiang; Editing by Christopher Cushing and