China Unicom's revenue exceeded 200 billion yuan in the first half of the year, with capital expenditures down 15% year-on-year | Financial Report Insights

Against the backdrop of overall growth pressure in the telecommunications industry, China Unicom has delivered a relatively robust mid-term report: in the first half of the year, operating revenue exceeded 200 billion yuan, profitability significantly improved, and the company's business structure continued to optimize.

On Tuesday afternoon, China Unicom announced its financial report for the first half of 2025. Key points are as follows:

• Financial performance: Operating revenue exceeded 200 billion yuan to reach 200.2 billion yuan, a year-on-year increase of 1.5%; pre-tax profit was 17.8 billion yuan, a year-on-year increase of 5.1%; basic earnings per share were 0.47 yuan, a year-on-year increase of 5.0%
• Business structure optimization: Revenue from intelligent network services was 45.4 billion yuan, accounting for 26%; revenue from strategic emerging industries accounted for 86%; international business revenue was 6.8 billion yuan, a year-on-year increase of 11%
• Shareholder returns: Mid-term dividend per share was 0.2841 yuan, a significant year-on-year increase of 14.5%; free cash flow was 8.78 billion yuan, a year-on-year increase of 63.1%
• Operational efficiency: Capital expenditure was 20.2 billion yuan, a year-on-year decrease of 15%; depreciation expenses decreased by 4.8% year-on-year; debt-to-asset ratio fell to 43.7%

Cost control shows results, but investment structure raises concerns

The company has performed excellently in cost control. Depreciation and amortization expenses were 40.32 billion yuan, a year-on-year decrease of 4.8%, mainly due to precise investments and deepening co-construction and sharing strategies. Capital expenditure of 20.2 billion yuan saw a significant year-on-year decrease of 15%, demonstrating the management's strict control over investment returns.

However, R&D expenses increased by 16% year-on-year, reflecting an emphasis on technological innovation, but given the revenue growth rate of only 1.5%, the sustainability of such investment intensity is worth noting. Especially in the layout of cutting-edge technologies like AI and 6G, it is difficult to see significant revenue contributions in the short term.

Concerns behind improved profitability

Pre-tax profit was 17.8 billion yuan, a year-on-year increase of 5.1%, with growth significantly outpacing revenue growth, primarily relying on cost control rather than revenue drivers. The sustainability of this profit model is questionable, especially in an environment of intensified industry competition.

It is noteworthy that the share of net profit from joint ventures was 1.35 billion yuan, which cannot be ignored in terms of overall profit contribution. The stability and predictability of this income are relatively weak, which may increase the risk of performance volatility.

Strong cash flow performance, but capital allocation efficiency needs evaluation

Free cash flow was 8.78 billion yuan, a significant year-on-year increase of 63.1%, mainly due to reduced capital expenditure. The net cash flow from operating activities was 29 billion yuan, providing the company with ample financial buffer.

The mid-term dividend per share was 0.2841 yuan, a year-on-year increase of 14.5%, with a relatively generous payout ratio. However, in the context of weak revenue growth, whether such a significant increase in dividends will affect future investment capacity is a concern for investors.

Real challenges facing strategic transformation

The company's proposed strategy of "integration of computing networks, intelligent data, and real data" is correct, but there are many challenges in execution. Although there are over 50,000 5G application projects and a cumulative creation of 7,500 5G factories, the profitability and replicability of these projects still need to be verified International business revenue reached 6.8 billion yuan, a year-on-year increase of 11%. Although the growth rate is good, it only accounts for 3.4% of total revenue, making it difficult to become an important growth driver in the short term.

Expectation Gap and Investment Logic

The market's expectation gap for China Unicom mainly focuses on two aspects: first, whether the AI and cloud computing businesses can truly achieve scalable profitability; second, whether the decline of traditional telecom businesses will exceed expectations.

From this financial report, the company is at a critical stage of transitioning from old to new growth drivers. Although the growth of new businesses is relatively stable, it has not yet fully compensated for the slowdown in traditional business growth. The debt-to-asset ratio is 43.7%, down 2.1 percentage points from the beginning of the year, indicating a relatively stable financial structure that provides some space for future transformation.

The core issue that investors need to pay attention to is: in the context of an increasingly obvious industry growth ceiling, can China Unicom achieve sustainable profit growth through differentiated strategies and efficiency improvements? From the current performance, the company is striving to find answers, but successful transformation still requires time for validation.

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