China Unicom Earnings: Solid Growth but Slightly Below Peers, Valuation Still Compelling

China Unicom reported a solid third-quarter result, but revenue and earnings growth were slightly below its peers. Third-quarter services revenue was up 3.5% year on year, with EBITDA down 0.2% year on year and net profit up 3.1% year on year, compared with industry average growth of 7.4%, 6.8% and 5.0%, respectively, based on our estimates. Industrial Internet is one area where China Unicom fell behind its competitors this quarter, growing only 9% year on year compared with 30% for China Mobile and 16% for China Telecom. China Unicom indicated with its first-half result that it was confident in the prospects for the industry internet business and was targeting over 20% growth for the full year, but we believe this target now looks unlikely as it would require a bounce back to 38% growth in the fourth quarter and macro trends are likely working against this. Third-quarter mobile service revenue increased 1.9% year on year, a slight increase from the 1.7% year on year in the second quarter.