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　　 Changjiang Securities Chen Zhijian

Key points of the report:

Event description:

　　 China Unicom [Weibo] The announcement said that China Unicom's operating company would acquire 100% of its equity in China Unicom New Space from China Unicom Group, and the consideration of this acquisition transaction was RMB 12.166 billion, which was paid by China Unicom's operating company in cash. The transaction will be completed in two parts, respectively: 1. The company will receive 100% of the equity of Unicom New Space, a subsidiary of China Unicom Group, a major shareholder; 2. The company transferred 100% of the equity of Unicom New Space to the Unicom operating company under the Unicom red chip company, and finally completed the transaction.

Event comment:

The transaction assets are closely related to the company's main business and have strong profitability: the underlying assets of this transaction are China Unicom New Time and Space Company, whose main assets are the fixed network assets of China Unicom Group in 21 southern provinces and some Dahongtong assets. Due to historical reasons, China Unicom's fixed network business in 21 southern provinces is mainly broadband business. Therefore, this part of assets is mainly China Unicom Group's broadband network assets in 21 southern provinces, which is closely related to the company's current main business. In terms of financial condition, the profitability of this asset is also strong and the asset quality is good.

The transaction helps the company to save costs and expenses, and also reflects the consideration of major shareholders to maximize the interests of listed companies: before this transaction, the company leased the fixed network resources of Unicom Xinshi in 21 southern provinces to operate the fixed network business, and paid network lease fees to Unicom Xinshi annually. One of the original intentions of China Unicom Group to facilitate this transaction is that the depreciation and amortization expense of the accounting year generated by Unicom New Space is less than the network lease expense paid by the listed company. Therefore, injecting this asset into the listed company can help the listed company to form a certain degree of cost saving and help to enhance the long-term value of shareholders. This behavior also reflects the consideration of major shareholders to maximize the interests of shareholders of listed companies.

This transaction will bring significant performance increase and positive impact on the company's annual performance: we estimate that the operating revenue of Unicom Xinshiji in 2012 was 2.6 billion yuan, and its net profit before tax was about 460 million yuan. Considering the impact of deferred income tax assets, its annual net profit was about 1.27 billion yuan. Considering that the acquisition of Unicom New Space will also bring about savings in rental costs, we judge that this transaction will at least bring about a net profit increase of about 1.5 billion yuan for the company. Based on the company's net profit in 2012, this transaction will bring about a one-time performance increase of about 20% for the company, which will significantly improve the company's performance.

Profit forecast and valuation: We raised the company's fully diluted EPS from 2012 to 2014 to 0.14 yuan, 0.27 yuan and 0.51 yuan respectively, and maintained the "recommended" rating of the company.

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