报告名称：China Unicom - H(00762.HK)Expecting FCF improvement and mobile turnaround
报告类型：港股研究
报告日期：2016-03-17
研究机构：摩根大通
股票名称：中国联通
股票代码：CHU,00762
页数：13
简介：Positive signs about mobile turnaround emerging: Stripping out the unused data rollover impact of Rmb2bn, the decline of mobile service revenue slowed to 2% yoy in 4Q15 and mobile ARPU increased by 1% yoy off a low base. Billing subs recorded positive growth in Jan and Feb, and daily average billing mobile service revenue has grown for two consecutive months as well. Reviving top-line growth is one of the companyˇs priorities, by taking measures such as increasing S&M in the near term and focusing resources on 4G with a target to catch up in network quality with CM in 138 cities by May.
Earnings in line, a messy year with many one-offs: 2015 earnings of Rmb10.6bn are actually better than some recent bearish estimates by brokers, partly due to less than expected unused data rollover impact of Rmb2bn and higher than expected tower transaction gain of Rmb9bn. If stripping out the one-offs such as unused data rollover impact, FX impact, tower transaction gain and share of Tower Co. loss etc, last yearˇs earnings would have been approx. Rmb7.5bn.
Significant capex cut a positive surprise, expecting improving FCF: The capex budget of Rmb75bn for 2016, which implies a 44% yoy drop, is below the streetˇs already lowered expectation. The reduction is due to a mix of factors such as network cooperation with CT, less 4G BTS rollout from 310K to 280K, significant cut in 3G spending, broadband upgrade project near conclusion etc. We expect FCF to rebound to approx. Rmb10bn this year, vs. minus Rmb50bn in 2015, and to continue growing afterwards driven by gradual decline in capex and growth in EBITDA.
Tower Co. likely to be earnings dilutive in the near term: Rmb2.9bn was booked for tower leasing in 4Q15 and the combined savings in depreciation and network maintenance opex are expected to cover roughly 80% of the leasing expense. The company expects this yearˇs leasing expense to increase on a full year basis but should be no more than Rmb20bn. We estimate approx. Rmb1bn negative earnings impact from the implementation of Tower Co. in 2016 based on current guidance. The actual impact is likely to be less than our estimates as CU is still negotiating with Tower Co. for better terms.

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