Management PresentMr. Chang Xiaobing Chairman & CEOMr. Lu Yimin Executive Director & PresidentMr. Li Fushen Executive Director & CFOMr. Li Gang Senior Vice PresidentMr. Zhang Junan Senior Vice President
Overall Financial Results(1) All financial figures in this document do not include deferred fixed-line upfront connection fee (RMB15 million in 2011), unless otherwise specified.(2) Due to unallocated items, operating revenue is not equal to the sum of mobile and fixed-line operating revenues, both of which are external revenues.(3) Due to unallocated items, service revenue is not equal to the sum of mobile and fixed-line service revenues.(4) Net profit would be RMB4,227 million in 2011, if including deferred fixed-line upfront connection fee.(5) Including deferred fixed-line upfront connection fee.(RMB millions) 2012 2011 YoYOperating Revenue 248,926 209,152 19.0%Of which: Mobile 164,771 126,526 30.2%Fixed-line 83,277 81,690 1.9%Service Revenue 210,127 185,870 13.1%Of which: Mobile 126,036 103,307 22.0%Fixed-line 83,213 81,627 1.9%EBITDA 72,658 63,397 14.6%EBITDA as % of Service Revenue 34.6% 34.1% +0.5ppNet Profit 7,096 4,212 68.5%Basic EPS (RMB) 0.301 0.179 68.2%DPS (RMB) 0.12 0.10 20.0%4(3)(2)(4)(5)(1)
2012 Performance Highlights5Transformation&UpgradeforGrowth1Industry-leadingRevenue Growth2Further OptimizedBusiness Structure3Scale Growth inKey Businesses4Rapidly ImprovedProfitability5SignificantlyEnhanced NetworkCapability Mobile’s share of service revenue: 60.0% Non-voice’s share of service revenue:53.1% 3G service revenue up 82.6% Broadband service revenue up 11.8% EBITDA over service revenue up 0.5pp Net profit up 68.5% All 3G base stations upgraded to HSPA+ Share of FTTH/B access ports up 14pp Service revenue growth 4.1pp higherthan industry average Market share up 1.5pp
Industry Average(1) Industry averages are growth rates in key business revenues released by MIIT.(2) The Company’s operating revenue over the sum of operating revenues released by the three listed telcos (excluding fixed-lineupfront connection fees).The CompanyService Revenue Growth Revenue Market Share22.8%21.3%20122011+1.5pp(2)8.3%13.1%13.4%6.4%10.0%9.0%(1)2010 2011 2012Difference+1.9pp+3.4pp+4.1pp6Industry-leading Revenue Growth & FurtherIncrease in Market Share
7 Mobile’s share of service revenue up 4.4pp to 60.0% Non-voice’s share of service revenue up 3.9pp to 53.1%2011 2012(RMB millions) (RMB millions)2011 2012(RMB millions)37.2%41.7%62.8% 58.3%103,307126,03670.0%30.0%81,62763.9%36.1%83,2132011 201255.6%43.9% 39.6%60.0%MobileFixed-line185,870210,1270.5% 0.4%(1)(1)(1) Unallocated items.(2) Including voice, monthly fee and interconnection revenue.Service Revenue & Mix Mobile Service RevenueFixed-line Service RevenueNon-voiceVoiceNon-voiceVoice(2)(2)Optimized Revenue Structure & EnhancedCapability for Sustainable Development
32,97993,9912011 201252.6%68.3%47.4%31.7%(1)15,82014,37017,07959,79632,73912,52710.9%2011 4Q122012 1Q12 2Q12 3Q12As % of 2Gservice revenue: 74.9% 85.3% 94.1%(RMB millions)(1) Average QoQ growth rate.Data Traffic Growth (3G Handset Users)107.8%3G becoming No.1 Revenue Contributor(1)(MB millions)Mobile Service Revenue Growth3G2G15.7pp2011 2012126,036103,307(RMB millions)Average monthlydata usage for 3Gsmartphone users:256MB83G Scale Growth Driving Transformation &Upgrade of Mobile Business
935,22639,370(1) As at YE2012; yoy change.(2) Including voice, monthly fee and interconnection revenue.(3) Including fixed-line VAS, ICT , data and others.(RMB millions)2011 2012Broadband Service Revenue GrowthBroadband Network Upgrade & Speed-upShare of 4M+BroadbandSubsShare ofFTTH/B AccessPorts63.8%59.0%(1)22.7%20.7%30.0%36.1%47.3%43.2%Fixed-line Service Revenue Growth+4.1pp2011 2012(RMB millions)83,21381,627+22.5pp+14.0ppBroadbandVoiceOthers(2)(3)Solid Broadband Growth Ensuring StableDevelopment of Fixed-line Business
10EBITDA(RMB millions) (RMB millions)Net Profit72,65863,39734.6%34.1%2011 2012EBITDA as % of service revenue7,0964,2112011 2012Net profit as % of service revenue2.3%3.4%Emerging Operating Leverage & RapidlyImproved Profitability
Supporting combined2G/3G operation andpreparing for integrated2G/3G operation in future Maintaining 3G advantagein network speed Further expanding fiberoptic broadband network Catering to customers’demand for better userexperience and fasterspeedRMB99.8 billion CAPEX in 2012 to build future-oriented high-speed 3G & broadband networks+38.5%# of 3G BaseStations:331,000+23.9%# of BroadbandAccess Ports:106 mnyoy changes+14ppOf which FTTH/B’sShare59%3G BaseStations:All upgraded to HSPA+Maintaining network advantagesto sustain rapid growthTransmissionNetwork:Scale deployment of IPRAN3G Coveragein Townships:All towns in Eastand Central China,developed townsin West China+44pp11Growth-oriented CAPEX & SignificantlyEnhanced Network Capability
70%52%36%21%50.4%42.4%32.6%2012 2013E 2014E 2015EFull Year Targets: Industry-leading RevenueGrowth Further Improved Profitability Substantially Lowered CAPEX-to-Sales Ratio Maintained NetworkAdvantages Further Enhancedinformatization Capability Emerging broadband and mobile Internet markets, rapidly growingdemand for data services and accelerating penetration ofinformatization into all parts of the society, indicate that 3G andbroadband businesses are still on the stage of rapid growth. 2013is still important development window of opportunity for ChinaUnicom.(1) Source: Sino Market Research Limited, JP Morgan.(2) Source: IDC.122013 Outlook: Seizing on StrategicOpportunity to Accelerate DevelopmentAccelerating 3G Penetration3G Penetration in China (1)Rising Smartphone Penetration92%86%81%62%2012E 2013E 2014E 2015ESmartphone’s Market Share in China (1)Proliferating Applications164.7133.2104.273.32012E 2013E 2014E 2015EGlobal App Downloads (in billions)(2)Improved Network CapabilityChina Unicom’s Evolving Mobile Network2011 2012-2013 2014~Speed up to:14.4MSpeed up to:21-42MSpeed up to:>100MDevelopment Strategies: Maintain network advantages,fully promote 3G scale growth,and push forward integrateddevelopment of differentservices, so as to realize fastgrowth in mobile business Maintain solid growth inbroadband business to realizestable development of fixed-line business
185,87027,057 1,451606 210,127-4,673-4,3284,14414Local Access(1) Including local voice, long distance, fixed-line VAS and interconnection revenues.Local Access2011 201234,00329,330(1)3G2011 201232,73959,7962011 3G Broadband ICT 20122G Data & Others(1)Contribution togrowth rate: +14.6pp +2.2pp -2.5pp +0.3pp-2.3pp +0.8pp2G2011 201270,568 66,240Broadband2011 201235,22639,370+13.1%Service Revenue(RMB millions)Overview3G & broadband continuing to drive solid revenuegrowth
95,74393,78736.0%20.2%70,568 66,24032,73959,796126,036103,307788,819654,25747.947.3(RMB millions)Mobile Service Revenue3G2G(RMB)Mobile ARPU(Million minutes / minutes)Mobile Total Voice Usage & MOU201220112012201120122011303.8 306.4Mobile SMS UsageHandset User MOUShare of 3G SMS20122011(Million messages)239,312199,66031.9%20.0%Share of 3G Subs(’000)Mobile Subscribers2012201115Mobile BusinessRapidly growing subs & revenue with furtherimproved subs quality
28,48516,057155,12279,5622011 2012(MB millions)Mobile Data Traffic Smartphone penetration in theCompany’s mobile subs up 14pp Promoted data volume operation; 3Gsmartphone user’s monthly data usageat 256MB Pushed forward WO+ platform buildup;further enhanced capabilities in smartpipe and Internet apps aggregationRegistered usersup 374%WO StoreMobile MusicFull year revenueup 174%WO ReadingMobile VideoFull year revenueup138%Full year revenueup 122%3G2G183,60795,61916Mobile BusinessProactive transformation & upgrade, rapid growth indata business
Differentiated2G/3G OperationCombined2G/3G OperationIntegrated2G/3G OperationEvolving Mobile Business StrategiesConditions for combinedoperation matureInitiatives of combinedoperationImprovedcustomer value 3G’s share of totalhandset sales in Chinaup 27.9pp yoy to 73.7%. Supply and quality-to-price ratio of RMB1,000smartphonessignificantly improved. The Company’s 3Gnetwork coverage intownships up 44pp yoy. In Oct 2012, the Companyopened its 3G network toexisting 2G users who signedup the following 3G datapackages:Monthly FeeLocal DataVolumeRMB10 100MBRMB20 300MBRMB30 500MB For 2G customers whosigned up those 3G datapackage in Nov and Dec2012:ARPU 4-5%Monthlydata usageper user80-90%17(1)(1) Based on 2012 data; Source: Sino Market Research Limited.Mobile Business2G/3G combined operation to further optimize mobilebusiness structure
46.3%43.2%39.0%44.7%Contract Users as % of 3G SubsMar 2012 June Sept Dec(1)313,133169,50176,45640,01918ARPU(’000, RMB)3G Subs & ARPU20122011110.0 86.1 17.7%10.2%2011 20123G Handset Subsidyas % of 3G Service Revenue(1) Due to the change in the definition of contract user in 2H2012, previous ratios were restated.(Million minutes, minutes)3G Total Voice Usage & MOUHandset User MOU20122011635.3492.3Mobile BusinessRapid growth in 3G subs, further decline in handsetsubsidy-to-sales ratio
43,80448,35822,43622,21070,56866,2402011 2012245.4256.92011 201234.237.42011 2012(’000, RMB)(RMB millions)(1) Including voice, monthly fee and interconnection revenue.2G Service RevenueVoiceNon-voice (1)2G Subs & ARPUARPU159,641 162,856(Million minutes, minutes)2G Total Voice Usage & MOUMOU484,756 475,6862011 2012(MB millions)2G Data Traffic16,05728,48519Mobile Business2G: decline in traditional services, strong growth indata service
StableDevelopmentof Fixed-lineBusinessBroadband Subs & ARPU63,86955,65154.456.42011 2012(’000, RMB)91,95792,85122.625.72011 2012(’000, RMB)Local Access Subs & ARPU% of 4M+ in Broadband Subs63.8%41.3%2011 201214,8808,38028.8%18.6%2011 2012(’000)“WO Family” Subs & ShareARPUARPUShare of Residential Broadband Subs20Fixed-line BusinessSolid growth in broadband, rapid increase in “WOFamily” penetration
Launch ofSmart CityStrategy Leading positions in a series of sectors：More than7.96 millionusersMobileOfficeAutoInformatizationInstalled in2.28 millionvehiclesWirelessSurveillanceInstalled in3.48 millionpointsScaleDevelopmentof IndustryApplicationsSmartGovernmentSmartTransportation SmartSecuritySmart Finance Smart EnergySmartMedical ServiceServiceRevenue fromEnterpriseCustomersyoy up24.4%ICT Revenueyoy up37.1%StrategicPartners112Key IndustryApplicationsUsers22.99 mn21Smart EducationSmart LogisticsEnterprise Customer BusinessIndustry applications driving fast growth inenterprise customer business
(RMB millions) 2012 YoY YoY %Operating Expenses 237,324 33,548 16.5%Adjusted Operating Expenses 198,386 18,558 10.3%Interconnection Charges 18,681 2,301 14.1%Depreciation & Amortization 61,057 3,036 5.2%Networks, Operations & Support 32,516 3,067 10.4%Employee Benefit 28,778 2,177 8.2%Selling & Marketing 35,037 6,286 21.9%3G Handset Subsidy 6,102 311 5.4%G&A and Others 16,215 1,379 9.3%Net Finance Costs 3,424 2,180 175.2%Net Other Income (Costs) 1,343 -108 -7.4%Total Costs & Expenses 239,405 35,836 17.6%(1) In 2012, costs of telecom products sold amounted to RMB45.04 billion, up 51.5% yoy; sales of telecom products amounted to RMB38.80 billion,up 66.6% yoy. As a result, loss of telecom products sold amounted to RMB6.24 billion, of which 3G handset subsidy RMB6.10 billion. Adjustedoperating expenses is defined as operating expenses minus costs of telecom products sold plus 3G handset subsidy.2) Net other income (costs): other income minus other costs.(1)(2)22Costs & Expenses
8.9%29.1%15.5%13.7%16.7%3.1%7.7%8.8%31.2%15.8%14.3%15.5%2.9%8.0%2011 2012 G&A and Others 3G Handset Subsidy Selling & Marketing Employee Benefit Networks, Operations &Support Depreciation &Amortization Interconnection Charges96.7%94.4%Adjusted Operating Expenses Structure(as % of service revenue)23Adjusted Operating Expenses(1)(1) In 2012, costs of telecom products sold amounted to RMB45.04 billion, up 51.5% yoy; sales of telecom products amounted to RMB38.80 billion,up 66.6% yoy. As a result, loss of telecom products sold amounted to RMB6.24 billion, of which 3G handset subsidy RMB6.10 billion. Adjustedoperating expenses is defined as operating expenses minus costs of telecom products sold plus 3G handset subsidy.
Appendix I: Income Statement(RMB millions) 2012 2011 (RMB millions) 2012 2011Revenue: Including：Selling & Marketing (35,037) (28,751)Service Revenue 210,127 185,885 Cost of Products Sold (45,040) (29,739)Sales of Telecom Products 38,799 23,282 Total Operating Expenses (237,324) (203,776)Total Operating Revenue 248,926 209,167 Operating Profit: 11,602 5,391Operating Expenses: - - Finance Costs (3,664) (1,474)Interconnection Charges (18,681) (16,380) Interest Income 240 230Depreciation & Amortization (61,057) (58,021) Net Other Income (Costs) 1,343 1,451Networks, Operations &Support(32,516) (29,449) Profit (Loss) Before Tax 9,521 5,598Employee Benefit (28,778) (26,601) Taxation (2,425) (1,371)SG&A and Others (96,292) (73,325) Net Profit (Loss) 7,096 4,22727(1)(1) Including deferred fixed-line upfront connection fees (RMB15 mn in 2011, RMB0 in 2012).
28(RMB millions) YE2012 YE2011 (RMB millions) YE2012 YE2011Non-current Assets (selected): Non-current Liabilities (selected):PPE 430,997 381,859 Long-term Bank Loans 536 1,384Lease Prepayments 7,601 7,657Promissory Notes & CorporateBonds2,000 22,000Goodwill 2,771 2,771 Convertible Bonds - 11,118Deferred Income Tax Assets 6,534 5,091 Total Non-current Liabilities: 4,299 36,408Financial Assets at Fair Valuethrough Other ComprehensiveIncome5,567 6,951 Current Liabilities (selected):Other Assets 14,480 13,101 Accounts Payable 108,486 95,252Total Non-current Assets: 467,950 417,430 Taxes Payable 1,820 1,232Current Assets (selected): Commercial Papers 38,000 38,000Inventories & Consumables 5,803 4,651 Short-term Bank Loans 69,175 32,322Accounts Receivable 13,753 11,412 Advances from Customers 42,345 35,722Prepayments & Others 9,580 6,127 Total Current Liabilities: 302,320 213,927Cash and Cash Equivalent 18,250 15,106 Total Liabilities 306,619 250,335Total Current Assets 48,174 38,803 Total Equity 209,505 205,898Total Assets 516,124 456,233 Total Liabilities and Equity 516,124 456,233Appendix II: Balance Sheet (selected)
Appendix III: Key Operating Metrics292012 20112G BusinessSubscribers (’000) 162,856 159,641ARPU (RMB)(1)34.2 37.4MOU (minutes)(1)245.4 256.9Voice revenue per minute (RMB) 0.092 0.1003G BusinessSubscribers (’000) 76,456 40,019ARPU (RMB) 86.1 110.0Handset user MOU (minutes)(1)492.3 635.3Fixed-lineLocal AccessSubscribers (’000) 91,957 92,851of which：Fixed-line 86,535 85,064PHS 5,422 7,787ARPU (RMB)(1)22.6 25.7of which：Fixed-line 26.1 27.4PHS 8.2 11.8Local voice usage (million pulses) (excludingInternet dial-up usage)81,491 125,275Long distance usage (million minutes) 18,197 21,553Fixed-lineBroadbandSubscribers (’000) 63,869 55,651ARPU (RMB)(1)54.4 56.4(1) Average number of subscribers for a period = sum of all monthly average number of subscribers in the period divided by total number of months inthe period; average number of subscribers for a given month = (the number of subscribers at the end of previous month + the number of subscribersat the end of the given month) / 2.
Forward-looking StatementsCertain statements contained in this announcement may be viewed as “forward-lookingstatements” 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 theCompany to be materially different from any future performance, financial condition or results ofoperations implied by such forward-looking statements. These risks, uncertainties and otherfactors include: the uncertainties in the development of the telecommunications industry andrelated technology in the PRC; the level of the market demand for telecommunicationsservices; changes in the competitive environment, regulatory environment and the PRCgovernment’s regulatory and/or industry policy for the telecommunications industry; the effectsof tariff reduction initiatives; the result of the anti-monopoly investigation by the NationalDevelopment and Reform Commission of the PRC relating to the price charged for Internetdedicated leased line access service provided by the Company to Internet service providers;the availability, terms and deployment of capital; changes in the assumptions upon which theCompany has prepared its projected financial information and capital expenditure plans;changes in the political, economic, legal and social conditions in the PRC; and other factorsthat will affect the execution of the Company’s business plans and strategies, as well as theCompany’s business condition and financial results.