China Unicom Hong Kong Ltd. CHU reported weak financial results in the first quarter of 2015 with net income of approximately $514.2 million, showing a decline of 4.2% year over year. Earnings per ADR (American Depository Receipt) also fell 8.7% year over year to 21 cents. China Unicom currently carries a Zacks Rank #5 (Strong Sell).
Revenues
Total revenue (excluding deferred fixed-line upfront connection fee) declined 2.8% year over year to $12,074.2 million in the first quarter of 2015. Total Service revenue stood at approximately $9,790.8 million (constituted 81.1% of the total revenue), down 5.6% year over year. Within this segment, Mobile revenues were $5,950.6 million, down 10% year over year and Fixed-Line Revenues were $3,764 million, up 1.1% year over year. Other service revenues were $76.2 million, up a whopping 128.8% year over year. Revenues from Telecom Product Sales totaled $2,283.5 million, up 10.9% year over year.
Expenses and Margins
In the first quarter of 2015, total operating expenses decreased 3.4% year-over-year to $11,101.5 million. Operating profit stood at $972.7 million, up 3.5% year over year. Operating margin was 8.1% compared with 8.2% in the year-ago quarter. EBITDA in the reported quarter came in at $4,118.7 million, up 5.6% year over year. EBITDA margin was 34.1% against 31.4% in the prior-year quarter.
Liquidity
During the first quarter of 2015, operating cash flow was $3,198 million, up 3.7% year over year. However, free cash flow was a negative $187.9 million compared with a positive $544.4 million in the year-ago quarter. China Unicom exited the first quarter of 2015 with cash and cash equivalents of $4,072.1 million compared with $3,514.3 million at the end of 2014. Total debt outstanding at the end of the reported quarter was $13,601.7 million against $14,944.8 million at the end of 2014.
Subscribers Statistics
As of Mar 31, 2015, China Unicom had 294.751 million (up 1.7% year over year) mobile subscribers, of which, 151.364 million (up 14.4% year over year) were 3G/4G users. The company added 2.259 million 3G/4G subscribers in the reported quarter but lost 4.347 million overall mobile customers. Overall Mobile average revenue per user (ARPU) was a little over $6.66, down 13.9% year over year.
Fixed-line broadband subscriber base was 69.599 million, up 4.8% year over year. The company added a net 809,000 fixed-broadband subscribers in the reported quarter.
China Unicom is the second largest telecom operator in China after China Mobile Ltd. CHL. The company has decided to significantly expand its 4G FDD-LTE networks and has given infrastructure development contracts to Nokia Corp. NOK and Alcatel-Lucent S.A. ALU.
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