China Mobile and China Unicom have announced the results of their work in the first half of 2019. According to our previous analysis and feedback, the communications industry has moved to negative growth, and China Mobile and China Unicom have no natural immunity. Even though China Telecom has not yet announced its revenue report, I am afraid that the industry has had a long history, so it's going to be a challenge.
On the one hand, revenues in industries have reached a negative trend of growth, on the other hand, the amount of construction funds required for 5G. Operators have become increasingly vulnerable to regulators and investors' expectations for revenue growth and revenue growth, as well as the creation and development of 5G, the growth of guaranteed yield or growth of 5G.
First, the decline in profit has become a reality
According to the state financial report, China Mobile's operating income in the first six months amounted to $ 389.4 billion. In the reporting period, it was 0.6% less than in the same period last year, including 351.4 bln. Reaching the ruble, which is 1.3% lower than in the corresponding period of the previous year; EBITDA was 151.1 billion tenge. The ruble was 3.6% higher than EBITDA; This rate was 38.8%, which is 1.6% higher than the annual rate; shareholders' profit is estimated at 56.1 bln. The ruble was profitable, and earnings per share amounted to 2.74 rubles, which is 14.6% lower than last year. Capital expenditures amounted to 85.2 billion US dollars. Free flow of money is about $ 41 billion.
China Mobile main financial data
In the first half of this year, China's Unicom's operating revenues totaled $ 145 billion. Reaching Ruble, which is 2.8% lower than last year, its revenue from services amounted to 133 billion tenge, or 1.1% compared to the same period last year; EBITDA1 amounted to 49.5 billion tenge, which is 8.4% more than in the corresponding period last year; profit tax in the amount of KZT8.7 bn. Earnings per share are estimated at $ 6.9 billion. The tenge was 16% higher than in 2011. Capital expenditures in the first half of the year totaled $ 22 billion. Effective control at Ruble level continued. Due to good control of cash flows, the free flow of cash was $ 20.3 billion. Having remained at the ruble level, the financial stability of the company increased and the financial position was stable.
China Unicom's key financial data
If you carefully analyze China Mobile and China Unicom revenue, you will notice that declining revenue for cellular communication services has become a major factor affecting revenue growth. Reduction in traffic business reveals a general tendency for growth. China Unicom, for example, showed a net increase of 9.32 million users in the first half year, but revenues from mobile telecommunications services amounted to 78.7 billion yuan, 6.6 percent less than in the same period last year.
Secondly, saving money was the main way to increase profits
In the first half of this year, one of the common aspects of China Mobile and China Unicom operations was the growth of negative returns, the growth rate of revenues of both companies was -0.6% and -2.8%, respectively, and the increase in service revenues was -1.3% and -1.1 respectively %. The difference between the negative growth rate of both services is small, but in terms of profit, the negative growth of both revenues is so great that their effectiveness is very different. Revenue from China Mobile has not only been negative, but also declined by 14.6%. China Unicom's status is different, with only 16% positive growth.
If the communications industry was not developed at all and the revenue from its own services grew negatively, China's Unicom's 16% increase over the year had a direct bearing on the stock exchange's knowledge. Whether or not investors are optimistic about China Unicom's future, this is the result of investors' behavior.
As industry analysts, we certainly do not notice changes in stock market prices. A detailed analysis of profit change helps us to fully understand the real situation of the communications industry, including China Mobile and China Unicom. There is a decline in service revenues, and the difference is the increase in profitability.
China Mobile's capital expenditure in the first half amounted to 85.2 billion yuan, exceeding 10 billion yuan over the same period of the year, compared to 149.9 billion yuan in the beginning of the year. This could explain the reasons for China Mobile's downside. If you take this into account, China Mobile's revenue will increase when the net income drops to 3 billion yuan.
China Unicom's net profit growth is clearer, as its revenue base was relatively low in the corresponding period of the previous year. When capital expenditure is low, it is easy and very easy to increase profit. In fact, you can analyze it yourself. In the first half of the year, capital expenditure of China Unicom amounted to 22 billion yuan, with the annual capital of 58 billion yuan in the beginning of the year, the current expenditure schedule is much slower than the timeline and the difference is 7 billion.
What is the reason for the growth and decline of profit? I do not think there is any need for further explanation. Everyone should be clear.
Third, you can meet all 5G performance
While revenue and gross revenues are rising annually, China's intentions to speed up the development of Mobile 5G have not only changed, but also improved. In the first half of the financial report, China Mobile announced plans to increase its investment: annual capital expenditure from 144.9 billion yuan to 165.9 billion yuan, 16 billion yuan, mainly for investment in construction of 5G. In the first half of this year, China Mobile's capital outlays exceeded 10 billion yuan a year.
Despite the considerable increase in revenue and significant cash flow improvements, China Unicom does not plan to increase capital expenditures and did not increase the costs of 5G capital expenditures. China's Unicom executive said at the Performance Conference that capital expenditures for 5G would not exceed 58 billion yuan (58 billion yuan in the beginning of the year), while the 5G capital expenditure will remain unchanged at 8 billion yuan.
China's Unicom does not intend to invest in the global 5G competition and internal competition for 5G, but has suggested ways to save money for the creation of 5G networks.
China Unicom's executive employee said the company is actively exploring new types of joint construction and distribution. China Unicom China Unicom negotiated 5G development with China Telecom and China Mobile, and the overall idea of cooperation with China Telecom is "co-creation and sharing", each of which maintains its base stations and manages its brands and customer groups. The direction of the negotiations with China Mobile is a roaming method, after the decision is made one more announcement.
China Unicom (also known as 5G) is China's Unicom, the best partner of Chinese Radio and Television. In fact, no matter how the 5G network is built, no investment can solve the problem of network coverage. How many are the main sites shared, even when you create and share them?
How to choose between short-term and long-term benefits, now operators have to make a choice. China Mobile and China Unicom have chosen everything from their current work, and their way is different. While each of these circumstances has objective limitations, it tries to overcome objective situations that lead to progress. (Zhang Yunlay – author of C114)
China Mobile official flagship shop