Unicom: A Bureaucratic Mess 中国联通：官僚混乱

By newsdoug on April 6, 2012

I don’t like to admit this, but I’m rapidly losing both confidence and interest in China Unicom (HKEx: 762; NYSE: CHU), China’s second biggest telco, which seems to be struggling with a never-ending series of management shuffles that are diverting its attention from its real business. To make matters worse, the company is facing a major challenge from China Telecom (HKEx: 728; NYSE: CHA), the smallest of China’s 3 major carriers, which has just announced some new figures suggesting it will get even more aggressive in its highly effective campaign to steal market share from both Unicom and industry leader China Mobile (HKEx: 941; NYSE: CHL). Let’s look at Unicom first, which has made steady headlines over the last year for all the wrong reasons, mostly involving misjudgement of China’s 3G market and an endless series of management reshuffles. The latest reports center on the latter type of news, with some reports saying the company is now undergoing a shift that will combine its sales and marketing departments, while others simply say adjustments are continuing. (English article; Chinese article) I hope readers will excuse me if I sound too cynical, but Unicom is showing all the signs of a company living in China’s socialist past, when state-controlled work units and their employees had little or no interest in running an efficient business and instead were more interested in the names of their positions and departments, and loved to hold endless meetings that produced no particular results. If this is the kind of company that Unicom wants to become, then perhaps there are some bureaucrats in Beijing who will welcome this return to a friendlier socialist past. But if it wants to be a competitive company, this fixation on bureaucracy needs to end soon. Otherwise the company risks becoming irrelevant and losing its spot as China’s second largest telco to China Telecom. On that front, China Telecom has just announced it is aiming to sell 80 million 3G handsets this year, some costing as little as 300 yuan, or less than $50 each. (Chinese article) I was surprised earlier this year when a company executive implied China Telecom was aiming to add 50 million 3G subscribers this year, which equated to 35 percent growth rate to its total subscriber base from the beginning of this year. (previous post) This new 80 million handset figure implies even more aggressive growth targets, and if the company really added that many new 3G users this year it would translate to more than a 60 percent growth rate over its total user base from the beginning of the year. If the current trends continue, which looks likely, I would fully expect to see China Telecom pass Unicom by the end of this year in 3G subscribers, and could even see it passing Unicom in terms of total subscribers sometime next year.

Bottom line: An increasingly focused and aggressive China Telecom is likely to pass an increasingly mismanaged Unicom by the end of this year in terms of 3G subscribers.

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