Behind the sharp drop in China Unicom's revenue growth: FDD is to blame

China Unicom's first-half financial report released last week actually gave everyone a shock, because although China Unicom's profits were good in the first half of the year, its revenue growth was pitifully low, only increasing by 3.6% year-on-year. The industry believes that in addition to the business tax reform, the slowdown in China Unicom's 3G revenue and the decline in terminal sales caused by the imbalance of 4G licenses may also be an important reason for the sharp decline in China Unicom's year-on-year revenue growth in the first half of the year.

China Unicom's revenue growth rate in the first half of the year fell dramatically

According to China Unicom's financial report, Unicom achieved operating income of RMB 149.57 billion, a year-on-year increase of 3.6%. It should be said that this increase is only 1/5 to 1/6 of the growth rate of Unicom's revenue in recent years, because Unicom's revenue in the first half of 2013 was RMB 148.61 billion, a year-on-year increase of 18.6%; and earlier in the first half of 2012, Unicom's revenue increased by as much as 20.0% year-on-year.

However, it is worth noting that China Unicom's announcement actually stated that its service revenue grew by 9.0% year-on-year, 3.4 percentage points higher than the industry average growth rate, which shows how low the revenue growth rate of the communications industry was in the first half of the year. Although China Mobile and China Telecom's first-half financial reports have not yet been released, it is predictable that the situation will be even worse.

China Unicom's terminal revenue fell year-on-year

A careful look at China Unicom's financial report reveals another phenomenon: Unicom's service revenue has grown significantly year-on-year, much higher than the company's revenue.

The financial report shows that China Unicom's operating income in the first half of the year increased by 3.6% year-on-year; but its service revenue in RMB increased by 9% year-on-year. So why was China Unicom's overall revenue only 3.6% year-on-year when its service revenue increased by 9% year-on-year?

According to the consistent characteristics of Unicom's previous financial reports, its revenue includes not only service revenue but also terminal revenue. It can be inferred that Unicom's terminal revenue should have dropped significantly, affecting the year-on-year growth of overall revenue. In particular, iPhone revenue used to account for an important proportion of Unicom's terminal revenue, but after China Mobile introduced the iPhone this year, it should have diverted part of Unicom's iPhone revenue.

The late issuance of FDD licenses has a huge impact

Objectively speaking, there are many reasons for China Unicom's revenue decline in the first half of the year, including the VAT reform, which caused China Unicom to no longer attach importance to revenue growth. However, the biggest impact on China Unicom in the first half of the year should be the 4G license. At the end of June 2014, the Ministry of Industry and Information Technology officially approved China Unicom and China Telecom to carry out 4G hybrid networking trials in 16 cities across the country. But before that, throughout the first half of the year, China Unicom could only use 3G to compete with China Mobile's 4G.

In terms of terminals, on March 18, after obtaining the TD-LTE license, China Unicom, together with 24 terminal manufacturers including Huawei, ZTE, and Samsung, jointly released 61 terminal products, including Samsung Galaxy Note3 Lite, HTC One Max 4G, and Huawei Ascend Mate2 and other 25 4G terminals. These products all support Unicom's TDD network, but TD-LTE mobile phones are not Unicom's main standard. In fact, these mobile phones only use Unicom's 3G network when they enter the market. Naturally, Unicom's 3G mobile phones can hardly resist China Mobile's 4G mobile phones.

It is reported that China Unicom has set a sales target of 188 million terminals this year, of which 100 million will be LTE+42M customized phones. This target is very difficult to achieve.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.