China Unicom reports spike in growth but costs rise too
China Unicom has reported a post-COVID-19 bump in first quarter sales and earnings – but operating costs spiraled as well.
The Chinese telco reported a 21.4% increase in income to 3.84 billion yuan ($590 million), a turnaround from last year's pandemic-driven 14% decline.
Total revenue was RMB82.3 billion ($12.7 billion), up 11.4%, with 8.2% higher service revenue of RMB73.9 billion ($11.4 billion) thanks to gains in every segment.
The biggest source of growth is industry Internet services, which spiked 25.9% and now account for just under a fifth of all revenue.
Unicom said it delivered smart city, digital government and industrial Internet services to enterprise customers, leveraging cloud, smart networks and smart apps, combined with Big Data, AI and blockchain to develop new applications.
The mobile business, which increased sales by 8.8%, also targeted industry, smart city and healthcare with 5G services, helping push post-paid ARPU to RMB44.6, up 11.5% year-on-year and 5.9% sequentially.
Yet these promising advances aren't registering on the bottom line.
Total EBITDA was flat at RMB23.64 billion ($3.6 billion), and service EBITDA margin contracted 2.5 percentage points to 32.0%.
Several key costs have risen sharply. According to China Unicom, the rapid growth in ICT services and the higher investments required drove general and operating expenses 19.1% higher.
Opex and support expenses rose 13.4%, which the company attributed to growth in rental premises and equipment, along with higher energy costs brought about by network and business scale expansion.
In this it echoes China Mobile, which earlier this week warned of rising electricity charges and other 5G costs. The big telco did not break out its expense details but also reported a 1.5 percentage point decline in its EBITDA margin.
Unicom also revealed that employee costs had risen 14.4%, which it said was a result of "reform of incentive systems" and the recruitment of new staff to boost "innovative development growth."
Unicom updated its 5G numbers, reporting 91.85 million 5G "package subscribers" at March 31, up from 70.8 million at December 31.
The MIIT announced this week that the national package subscriber total had passed 350 million, while the number of 5G device subscribers had reached 285 million, up from 198.2 million at the end of 2020, and now accounting for 17.8% of all Chinese mobile users.
— Robert Clark, contributing editor, special to Light Reading