Sputtering Unicom’s Latest Excuse: Lack of Leadership

By newsdoug on November 1, 2011

Unicom's latest excuse: blame it on the management China Unicom (HKEx: 762; NYSE: CHU) is reportedly conducting a massive search for top-level managers in many provinces, once again underscoring how the company is badly in need of strong new leadership as it increasingly appears to be squandering its golden opportunity to gain market share over dominant carrier China Mobile (HKEx: 941; NYSE: CHL). According to Chinese media reports, Unicom is looking for people to head its operations in a large number of provinces, continuing a search that dates back as far as February last year. (Chinese article). It’s been nearly 3 years now since Unicom merged with rival China Netcom in a major industry restructuring, and certainly the company can be forgiven for not filling key positions for the first year or so after such a big change. But 3 years is quite a long time, and if it’s taking them this long to fill these key positions it’s no surprise that the company is making little or no progress at bolstering its position in China’s mobile market. Most will recall that Unicom was given a golden opportunity to gain share over China Mobile, which controls over two-thirds of China’s mobile market, nearly 3 years ago when it was awarded a 3G license based on the world’s best technological standard. By comparison, China Mobile received a big handicap by having to develop its 3G service using a homegrown standard with lots of problems. Despite that, Unicom’s share of the 3G market has remained stagnant since the beginning of the year, at around 30 percent. Meantime, China Mobile’s 3G share has eroded from 45 percent in April to 42 percent in September, with the country’s third-largest carrier, China Telecom (HKEx: 728; NYSE: CHA) picking up all of those loses. Unicom, which also has the enviable advantage as China’s only official seller of Apple’s (Nasdaq: AAPL) iPhones, previously blamed a lack of 3G handsets for its failure to pick up share despite its obvious technological advantages. Now it looks like it’s blaming lack of strong management at the provincial level. Either way, Unicom seems to be better at making excuses than doing good business, and I’m fast losing confidence in its ability to bolster its position under current management.

Bottom line: Unicom’s latest problems in filling top management jobs at the provincial level reflect a poorly run company that is fast squandering its golden opportunity to pick up market share from rivals.

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