What changes have been made to China Unicom 2017?

If the telecommunications industry were compared to the entertainment sector, then “flow stars” in this year’s landscape are undoubtedly China Unicom. From the start of the year to the end, the concept of “mixed reform”—a restructuring of state-owned enterprises through private participation—has been at the core of China Unicom’s 2017 strategy.

At the capital, business, and management levels, major Internet companies like BATJ (Baidu, Alibaba, Tencent, and JD.com) have invested billions in shares. Initiatives such as Tencent Wangka, broadband services, and equity incentives for employees totaling 850 million have captured public attention. These moves, happening within a large state-owned telecom enterprise, signal that China Unicom is navigating turbulent waters with the goal of reaching new heights.

Industry media have closely followed the entire process of China Unicom’s mixed reform, from initial rumors to full implementation. Looking back on 2017, it can be said that the reform achieved early success. As we move into 2018, the reform will continue, but so will external competition. China Unicom is ready to embrace challenges and grow stronger.

The process of China Unicom's mixed reform has been complex and full of challenges. In 2015 and 2016, there were ongoing rumors about a possible merger with China Telecom. In October 2016, China Unicom was included in the first batch of pilot projects for the national mixed reform. By March 2017, the company's leadership had expressed support for the reform plan, which was being reviewed by relevant government departments. On April 5, 2017, China Unicom officially designated its A-share subsidiary as the platform for the mixed reform. Later that year, in July, the National Development and Reform Commission approved the pilot project, and in August, the company released proposals for the non-public issuance of A-shares and restricted stock incentive plans.

With over 3,000 listed companies in the A-share market, capital restructuring is common. However, the mixed reform of state-owned enterprises goes beyond typical capital restructuring. It involves improving the governance of SOEs, optimizing capital allocation, and enhancing operational efficiency. For a large central enterprise like China Unicom, with over 200,000 employees, the coordination required is immense.

One example is the involvement of multiple ministries and commissions in the reform process. According to Wang Xiaochu, China Unicom needed to communicate with 10 different government agencies, each with its own set of rules. Breaking through outdated regulations takes time and effort. Despite these difficulties, the company hopes to contribute to broader reforms and achieve meaningful progress.

Another challenge came in August 2017 when the Shanghai Stock Exchange raised concerns about the reform plan. China Unicom had to cancel some announcements overnight due to regulatory issues. Eventually, the reform was approved under special circumstances, highlighting its significance in the context of deepening central enterprise reforms.

Employee equity incentives were also a major part of the reform. Offering 850 million restricted shares at just 3.79 yuan per share to 3% of employees was a bold move. This initiative generated widespread interest, showing how much attention the company’s internal reforms have received.

Despite the twists and turns, the reform process has moved forward smoothly. As of now, 92% of the workload has been completed, including the employee shareholding plan, organizational streamlining, and partnerships with strategic investors. The next step is to implement the changes and see real results.

“Mixed” is largely complete, and the real work now lies in “changing.” This is the view of Wang Xiaochu, who sees the future of China Unicom as one of transformation and growth.

As the reform progresses, China Unicom has launched several innovative initiatives. Collaborations with internet giants like Tencent and Alibaba have led to products such as the "Tencent King Card" and "Ant Baoka." These custom cards have attracted millions of users, with Tencent Wangka alone reaching 50 million users.

On the fixed-line broadband side, China Unicom introduced an "unlimited traffic" package and a revolutionary pricing model: no monthly fee, no box fee, no TV fee, just 1 yuan per day. This approach has disrupted traditional broadband models and is expected to bring more innovation in 2018.

In the 4G era, China Unicom faced performance challenges. In 2015, mobile user numbers dropped for 11 consecutive months, and in 2016, net profit fell to 630 million yuan. However, by 2017, the company began to recover. By November 2017, China Unicom had added 5.05 million 4G users, reaching a total of 170 million. Fixed broadband subscribers also increased, and the company reported a 168% year-on-year increase in net profit for the first three quarters of 2017.

With 50 million Tencent Wangka users and a growing number of internet-based packages, China Unicom shows signs of a bright future. However, there are also challenges. Internet-based packages often have lower ARPU values, which could affect short-term profits. For instance, the average revenue per 4G user dropped to 66.5 yuan in the first half of 2017, down from 81.3 yuan the previous year.

As of October 2017, old users could switch to internet-based packages, and the impact will become more visible in 2018. If the company expands nationwide, it may face similar challenges. For China Unicom, the mixed reform requires not only courage but also long-term vision. As a veteran central enterprise, it must navigate various obstacles and focus on innovation to lead the communications industry and create lasting value.

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