Among the three major telecom operators in China, China Mobile and China Unicom are the most well-known, but in the 4G era, China Unicom dropped from the second to the third. However, China Unicom reconsidered its pain and improved its performance significantly after the mixed reform in 2017, mainly in the two aspects of the sharp increase in the number of 4G users and the increase in profit margins.

The number of 4G subscribers surged. In 2017, 4G users of China Unicom increased by 70.33 million, which is the best year for China Unicom in recent years. It is worth noting that nearly 50 million of the 70.33 million users are Internet card users, so it can be seen that mixed reform has indeed brought great vitality to China Unicom.

Profit margin improved significantly. In March 2018, China Unicom announced its annual financial report for 2017, in which the revenue of communication services was 249.02 billion yuan, up 4.6% year on year, and the net profit was 1.83 billion yuan, up 192.5% year on year. Compared with 2016, The net profit of China Unicom was only 480 million yuan, a dismal result with a year-on-year decrease of 96%. The profit margin of China Unicom in 2017 was significantly improved, which is attributed to the mixed reform of China Unicom in 2017.

Although The profit margin of China Unicom increased for the first time in recent years, it did not achieve the expected effect of mixed reform. There was still a big gap between China Mobile’s 15.4% profit margin and 114,219 billion yuan, and China Telecom’s 5.1% profit margin and 18.617 billion yuan net profit. Part of the reason for the failure to achieve the expected effect of mixed-mix reform is that the reform failed to solve some existing problems in a timely manner.

Although China Unicom mixed reform has achieved some results, problems still remain

China Unicom’s mixed-use reform in 2017 brought the number of 4G subscribers to 175 million, close to China Telecom’s 180 million, and improved its profit margins. The results of the reform are immediate, but the net interest rate of 0.95% shows that the reform still has some problems.

Problem one: capital link is still weak. Lack of capital has been the no. 1 problem plaguing China Unicom, and the root cause of China Unicom falling far behind the other two operators. Although China Unicom has introduced 75 billion yuan of capital through mixed reform, it is just a drop in the water for the huge expenses of operator construction, and cannot solve the problem of insufficient funds for China Unicom’s 4G network construction, let alone the 5G infrastructure construction, where everything needs to be started from scratch. Weak capital link is still the biggest problem hindering the development of China Unicom.

On the one hand, the weak capital link will reduce the competitiveness of China Unicom. The lack of funds leads to the incomplete infrastructure construction and long upgrading cycle of China Unicom, which not only reduces user experience, but also puts China Unicom at a disadvantage in the competition with the other two operators. On the other hand, the weak capital link will increase the development burden of the company. The most intuitive case is Unicom’s streamlining and layoff, which reduced the number of institutions from 27 to 20, reducing by more than 20%. Headcount was cut by more than 50% from 1787 to 891, not only to improve execution, but also to “cut back” due to lack of funds.

Problem 2: Poor infrastructure construction and user experience. The deepest impression of China Unicom to users is poor signal, and the direct cause of poor signal and reduced user experience is the poor infrastructure construction of China Unicom. In 2016, the National Development and Reform Commission and the Ministry of Industry and Information Technology jointly issued the Three-year Action Plan for The Construction of Major Information Infrastructure Projects, which clearly pointed out that 2 million 4G base stations would be built in the next three years. China Mobile had built 1.87 million 4G base stations as early as 2017, with relatively perfect infrastructure construction. The task of building 2 million new base stations mainly falls on China Unicom and China Telecom. However, by the end of 2017, China Unicom only had 850,000 4G base stations, and its business performance in the past two years was poor, so it could not afford the construction of a large number of base stations, which directly led to the slow infrastructure construction of China Unicom and indirectly led to poor user experience.

Problem three: failed to grasp the development trend of The Times. Throughout the development of China Unicom in the past ten years, it is not difficult to find that China Unicom has many good development opportunities, but it failed to seize the opportunity to develop the company. The reason is that it failed to grasp the development trend of The Times. For example, when 4G network began to be popularized, China Unicom failed to fully consider the relationship between the market, consumers and the company, and only made the company’s operation plan according to the company’s own situation. It went against the trend of 4G era and continued to develop 3G network according to the company’s plan regardless of market changes. When China Unicom found that 4G was the mainstream of the era, China Mobile and China Telecom had already occupied most of the 4G market. At this time, China Unicom made up for it too late and eventually fell behind in the 4G era.

Three arrows through the cloud, cut through the dark clouds hindering the development of Unicom

In 2017, Through mixed reform, China Unicom not only introduced BAT Internet capital, but also vertical industry giants, state-owned funds and other capital. Although it made a comeback in the “second half” of 4G, the following three points still need to be done in order to fully surpass China Telecom and return to the second place:

First, actively introduce more capital in preparation for 5G.

The main reason why China Unicom lags far behind the other two communication enterprises in the 4G era is that it has not grasped the opportunity of 4G. The main reason why China Unicom has not grasped the opportunity of 4G is that it has limited capital and less investment in 4G. Therefore, it should actively introduce more capital to prepare for 5G and seize the opportunity of 5G. There are three ways unicom can bring in money.

The first is to introduce more capital from private enterprises. The effect of mixed-mix reform has been obvious. A total of 78 billion yuan has been introduced into China Unicom. The capital inflow of 78 billion yuan has reduced the asset-liability ratio of China Unicom from 62.6% in the same period last year to 46.5%, which has further improved the CONSTRUCTION of 4G infrastructure. Nor can it provide more funds for the development of 5G, so it is necessary to introduce more private enterprise capital to guarantee the rapid development of China Unicom.

The second kind: reduce the entry threshold, introduce the capital investment of private small and medium-sized enterprises. Although China Unicom has introduced the shareholding investment of large group enterprises through the mixed reform, after all, large group enterprises are a few, while the combined power of the vast number of small and medium-sized enterprises is infinite. China Unicom should reduce the entry threshold and encourage the inflow of capital from private small and medium-sized enterprises, so that a trickle can also become a river.

Third: open employee shares, let more employees hold shares. As of 2015, China Unicom had more than 230,000 employees. If more employees hold shares, China Unicom will not only bring a large amount of capital and be able to prepare for 5G, but also improve employees’ work motivation and real income, which is a double benefit.

Second, strengthen infrastructure construction and improve user experience.

Although China Unicom has made a series of adjustments in terms of “soft power” and the gap between China Unicom and the other two companies is narrowing, the user experience of China Unicom is still not very good. Due to the weak infrastructure construction of China Unicom and the lack of “hard power”, the user experience of China Unicom is not good. So how can China Unicom strengthen its “hard power” to promote its “soft power” to improve the poor user experience?

First, strengthen the construction of infrastructure. China Unicom is far behind in the 4G era because 4G base station construction is not only fewer, and the signal is not as good as the other two operators, greatly affecting the user experience. This is also the reason why China Unicom has been experiencing negative growth in 2015 and 2016. Now, in the transition from 4G to 5G era, China Unicom not only needs to build 4G base stations, but also needs to prepare for large-scale construction of 5G base stations to avoid repeating the mistakes of 4G era.

Second: further reduce package fees, balance user experience. Having lost ground to the other two in network signals and base station construction, China Unicom needs to make up for its own shortcomings in other ways if it is to become more competitive. Though the standards of China unicom in three home is the most economical, but with the other two did not have very much, if you want to compete with China mobile and China telecom’s strength is the most direct and effective to further reduce the package prices, allow users to feel the real benefits to make up for the problem of insufficient product competitiveness, so as to further improve the user experience.

Finally, insight into the development trend of The Times, and make supporting plans to achieve targeted.

China Unicom’s capital and “soft and hard” strength are far from enough, just like a person with a healthy body and a high IQ, but not to develop the brain and coordination of the body is nothing. So China Unicom also need to have a keen sense of smell, time insight into the development trend of The Times, in order to succeed.

Understanding the development trend of The Times can set a company on the road of rapid development, and making corresponding plans can make the company achieve twice the result with half the effort. Xiaomi is such a company. When the mobile phone market fell into the red sea, Xiaomi realized that the development trend of mobile phones was inevitably differentiation, and quickly formulated its product strategy. In 2016, Xiaomi launched the world’s first full-screen mobile phone, Mi MIX, which enabled Xiaomi to gain a firm foothold in the high-end mobile phone market. When 4G was coming, China Unicom did not have an insight into the development trend of The Times and indulged in the dream brought by 3G, which eventually led to a comprehensive defeat in the 4G era. Now 5G will be a new trend of the development of The Times, and it is also the best time for China Unicom to fight back. At this time, China Unicom should always be vigilant, have an insight into the trend of 5G development, and make corresponding plans to achieve the target.

summary

In general, although Unicom was overtaken by China Telecom in the 4G “first half” due to some problems in decision-making and service, it is not too late to make amends. In the “second half” of 4G, China Unicom slowly catches up with China Telecom through mixed reform and other measures, and seems to surpass China Mobile faintly. However, There is still a long way for China Unicom to surpass China Telecom and even China Mobile, and it needs to grasp the next 5G, a once-in-a-lifetime opportunity, to make a beautiful turnaround.

Article/Liu Kuang public account, ID: Liukuang110