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China Unicom (Hong Kong) 邁步從頭越 ANNUAL REPORT 2015 CHINA UNICOM (HONG KONG) LIMITED HKEx : 0762 NYSE : CHU 352037/<)2&86(' 5(6285&(621*72)8(/ 02%,/(%86,1(66020(1780 ARPU FTTH RMB FTTX IDC 88 'HF 4G net add >42 million Big Data Internet+ C0-building M FTTH CONTENTS 2 Company Profile 3 Shareholding Structure 4 Performance Highlights 6 Major Events 8 Chairman’s Statement 15 Business Overview 4G base station 21 Financial Overview 28 Biographical Details of Directors and Senior Management 35 Corporate Governance Report 400k 52 Report of the Directors 72 Human Resources Development 74 Corporate Social Responsibility 78 Notice of Annual General Meeting 81 Independent Auditor’s Report 82 Consolidated Statement of Financial Position 84 Consolidated Statement of Income 85 Consolidated Statement of Comprehensive Income 86 Consolidated Statement of Changes in Equity 87 Consolidated Statement of Cash Flows 89 Notes to the Consolidated Financial Statements 166 Financial Summary 168 Corporate Information FORWARD-LOOKING STATEMENTS Certain statements contained in this report may be viewed as “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933 (as amended) and Section 21E of the U.S. Securities Exchange Act of 1934 (as amended). Such forward- looking statements are subject to known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of the Company to be materially different from any future performance, financial condition or results of operations implied by such e forward-looking statements. In addition, we do not intend to update these forward-looking statements. Further information regarding these risks, uncertainties and other factors is included in the Company’s most recent Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission IC (the “SEC”) and in the Company’s other filings with the SEC. T COMPANY PROFILE China Unicom (Hong Kong) Limited (the “Company”) was incorporated in Hong Kong in February 2000 and was listed on the New York Stock Exchange and The Stock Exchange of Hong Kong Limited on 21 June 2000 and 22 June 2000 respectively. On 1 June 2001, the Company was included as a constituent stock of the Hang Seng Index. The Company merged with China Netcom Group Corporation (Hong Kong) Limited on 15 October 2008. The ultimate parent company of the Company, China United Network Communications Group Company Limited (“Unicom Group”) also gained approval and officially merged with China Network Communications Group Corporation (“Netcom Group”) on 6 January 2009. As at 31 December 2015, Unicom Group held 61.87% of the shares in the Company through China United Network Communications Limited (“A Share Company”), China Unicom (BVI) Limited and China Unicom Group Corporation (BVI) Limited; the public investors of the A Share Company held 12.49% of the shares in the Company through A Share Company’s shareholding in China Unicom (BVI) Limited. The remaining 25.64% of the shares in the Company are held by public investors at The Stock Exchange of Hong Kong Limited and New York Stock Exchange. At present, the Company provides a full range of telecommunications services in China, including mobile broadband (WCDMA, LTE FDD, TD-LTE), fixed-line broadband, GSM, fixed-line local access, ICT, data communications and other related value-added services. As at the end of 2015, the Company has fixed-line local access subscribers of about 74 million, fixed-line broadband subscribers of about 72 million, and mobile billing subscribers of about 252 million. 2 China Unicom (Hong Kong) Limited Annual Report 2015 SHAREHOLDING STRUCTURE CHINA UNITED NETWORK COMMUNICATIONS GROUP COMPANY LIMITED 2 Other Public Promoters Shareholders 62.54% 0.01% 37.45% CHINA UNITED NETWORK COMMUNICATIONS LIMITED 100% 17.90% 82.10% China Unicom Group China Unicom Other Public Corporation (BVI) Limited Shareholders (BVI) Limited 33.75% * 40.61% 25.64% CHINA UNICOM (HONG KONG) LIMITED (Updated on 31 December 2015) * excluded the interest in 225,722,791 shares of the Company held by China Unicom Group Corporation (BVI) Limited as trustee on behalf of a PRC shareholder. China Unicom (Hong Kong) Limited Annual Report 2015 3 PERFORMANCE HIGHLIGHTS CHALLENGING BUSINESS ENVIRONMENT PUT REVENUE AND PROFIT UNDER CONSIDERABLE PRESSURE Operating Service Revenue Revenue RMB RMB 235.28 277.05 BILLION BILLION EBITDA Margin 37.2% Net Profi t RMB EBITDA 10.56 RMB BILLION 87.50 BILLION Mobile Subscribers Fixed-line Broadband Sub- 286.7 scribers MILLION Fixed-line Local 72.3 Access Subscribers MILLION 73.9 MILLION 4 China Unicom (Hong Kong) Limited Annual Report 2015 PERFORMANCE HIGHLIGHTS KEY FINANCIAL DATA 2015 2014 Operating Revenue (RMB billions) 277.05 284.68 Service Revenue1 (RMB billions) 235.28 244.88 Of which: Mobile service 142.62 155.10 Fixed-line service 91.26 88.48 EBITDA2 (RMB billions) 87.50 92.77 EBITDA as % of service revenue 37.2% 37.9% Net Profit (RMB billions) 10.56 12.06 Basic Earnings per Share (RMB) 0.441 0.505 Dividend per Share (RMB) 0.17 0.20 KEY OPERATING DATA 2015 2014 Mobile Subscribers (millions) 286.7 299.1 Mobile Billing Subscribers3 (millions) 252.3 266.6 Mobile ARPU (RMB) 40.8 44.1 Mobile Billing Subscribers ARPU3 (RMB) 46.3 47.8 Fixed-line Broadband Subscribers (millions) 72.3 68.8 Fixed-line Broadband ARPU (RMB) 63.6 62.2 Fixed-line Local Access Subscribers (millions) 73.9 82.1 Note 1: Due to the existence of unallocated items, service revenue is not equal to the sum of service revenue from mobile service and fixed-line service. Note 2: EBITDA represents profit for the year before finance costs, interest income, share of loss of associates, share of loss of joint venture, other income-net, income tax, depreciation and amortisation. As the telecommunications business is a capital intensive industry, capital expenditure and finance costs may have a significant impact on the net profit of the companies with similar operating results. Therefore, the Company believes that EBITDA may be helpful in analysing the operating results of a telecommunications service operator like the Group. Note 3: In order to better satisfy the strategic management needs of the Company, the Company’s internal management and analysis in relation to the mobile service will focus more on the mobile billing subscribers (which in general refer to subscribers who have revenue contribution in the current month) and 4G subscribers (mobile billing subscribers who possess 4G handsets and use the 4G network of the Company) in 2016. From January 2016 onwards, the aggregate number and net addition of mobile billing subscribers and 4G subscribers will be disclosed. On the other hand, the aggregate number of mobile broadband subscribers will no longer be disclosed. The adjustment in the disclosure of subscriber statistics will not affect the Company’s revenue and profit recognition. China Unicom (Hong Kong) Limited Annual Report 2015 5 MAJOR EVENTS China Unicom’s 3G network successfully covered JANUARY Zhongshan Station in Antarctica. China Unicom was granted the license to FEBRUARY operate “LTE/4G digital cellular mobile service (LTE FDD)” by the Ministry of Industry and Information Technology. China Unicom officially launched the first NFC APRIL handset with all-in-one SIM. 6 China Unicom (Hong Kong) Limited Annual Report 2015 MAJOR EVENTS China Unicom launched an unused mobile data carry-over policy for all its 2G/3G/4G subscribers, which allowed the unused monthly data to be carried over for use till the end of the following month to enhance the data consumption experience of customers, accelerate the subscriber and service upgrade, and promote the strategic transformation of the Company. OCTOBER China Unicom entered into agreement with China Tower Corporation Limited for the disposal and transfer of telecommunications towers and related assets. China Unicom officially launched “WO 4G+”, a new 4G brand image for China Unicom – not only faster, but more pleasant experience, more relieved consumption, and better service”, enhancing the competitiveness and the development confidence of 4G. DECEMBER China Unicom was awarded two grand prizes in 3rd Chinese Enterprises New Media Annual Conference, being The Most Influential New Media Accounts 2015 of Chinese Enterprises and The Most Influential New Media Accounts 2015 of State–Owned Enterprises. China Unicom held 2016 Work Conference, at which full implementation of “Focus Strategies” was put forward, driving a new chapter for the works of China Unicom. China Unicom (Hong Kong) Limited Annual Report 2015 7 CHAIRMAN’S STATEMENT WANG XIAOCHU Chairman and Chief Executive Officer Big Data Internet+ FTTX Mbps Internet of Things C0-building 8 China Unicom (Hong Kong) Limited Annual Report 2015 CHAIRMAN’S STATEMENT DEAR SHAREHOLDERS, In 2015, facing the complex changes of the business environment and the stiff challenges including, among others, “Speed Upgrade and Tariff Reduction1”, “One- month Mobile Data Carry-over2”, the replacement of business tax with value-added tax3 (“VAT Reform”) and intensifying competition, the Company took proactive steps to address the challenges by adjusting its strategic thinking, leading to clearer strategic direction and business focuses. The Company has nurtured progressive positive changes in its operations, laying a solid foundation for its long-term transformation and sustainable growth. OVERALL RESULTS In 2015, both the revenue and profit of the Company were under considerable pressure. The service revenue for the year amounted to RMB235.28 billion, down by 3.9% compared with the previous year, while revenues from non-voice service accounted for 69.1% of the service revenue, representing a year-on-year increase of 7.2 percentage points. The Company’s EBITDA declined by 5.7% year-on-year to RMB87.50 billion. EBITDA as a percentage of service revenue was 37.2%, down by 0.7 percentage points year-on- year.
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