Good afternoon, ladies and gentlemen. I am Jacky, Company Secretary of China Unicom. Welcome to our results conference call. First of all, please allow me to introduce the management present today. Mr. Wang Xiaochu, Chairman and CEO. Mr. Chen Zhongyue, Executive Director and President. Mr. Liang Baojun, Senior Vice President. Now, let's invite Chairman Wang to talk about our 2021 interim results.
Good afternoon, ladies and gentlemen. It's my great pleasure to discuss with you China Unicom's results. Due to the pandemic, unfortunately, we still can't meet in person in Hong Kong today and need to discuss via a teleconference. Stay safe and healthy, everyone. In today's presentation, I will summarize our overall results in the first half of 2021. Mr. Chen Zhongyue will then discuss our operating and financial performance. Lastly, the management will take any questions you have. Highlights of the company's results in the first half are as follows. First, our revenue and profit growth accelerated on the back of determined innovative transformation and in-depth mixed-ownership reform. Second, we accelerated increase in shareholder returns and strive to unlock the potential investment value of the company. Third, our 5G-led mobile business transformation and innovative development delivered remarkable success. Fourth, our digital transformation empowered continuous robust growth in innovative businesses.
Fifth, we deepened network co-build co-share , and effectively enhanced our edges and returns. Lastly, we are going to seize new opportunities of the industry and endeavor to achieve high-quality development. In the first half, the company practiced new development philosophies, deeply implemented the strategy of focus, innovation and cooperation, and sped up comprehensive digital transformation. Our revenue and profit growth accelerated. Our service revenue was CNY 148.7 billion, up by 7.5% year-on-year. Net profit was CNY 9.2 billion, up by 21% year-on-year. The company's growth quality and return kept improving in recent years. Our service revenue mix was further optimized. Industry internet revenue contributed to 19% of our total service revenue, giving fresh impetus to our growth. Benefiting from sustained good control of CapEx and efficient operation, we had generated free cash flow of over CNY 170 billion over the past four and a half years.
Our net profit continued to grow at double digits. The company's fundamentals have further strengthened. The company has high regard for shareholder returns. Dividend per share grew at double digits over the past three years. To accelerate increase in shareholder returns, with due regard to the company's robust business development and strong free cash flow, the board decided to distribute an inaugural interim dividend of CNY 0.12 per share in 2021. Meanwhile, the company will raise 2021 full-year dividend payout ratio, with the magnitude to be decided by the board in March next year, taking into account such factors as the company's profitability, cash flow, future capital requirements, et cetera. Based on public data from Bloomberg, the average of over 20 analyst target prices for the company is HKD 7.44 per share, showing huge potential investment value.
Building on our solid results achieved in the first half, the company will endeavor to drive revenue, profit, and dividend growth to unlock our potential investment value, creating greater value for our shareholders. In the first half, the company deepened 5G-driven growth and insisted on rational and orderly competition. We struck an effective balance between value operation and scale development, driving transformation and innovative development of mobile business. We had 113 million 5G package subscribers with a market share of 23%, which was 3.7 percentage points higher than our overall mobile market share. Following the turnaround last year, our mobile service revenue grew by 7.3% year-on-year in the first half. Our mobile ARPU increased by 8.5% year-on-year, demonstrating further success in our value-oriented operation. In innovative businesses, we formed Unicom Digital Technology to create integrated and differentiated edges.
We actively nurtured and promoted innovative 5G+ vertical applications and deepened the comprehensive cooperation with strategic investors and industry leaders. Our industry internet business maintains strong growth momentum with revenue reaching CNY 28 billion in the first half, up by 24% year-on-year. It has become our key revenue growth driver. Going forward, the company will continue to enhance our proprietary capabilities in platform development, R&D centralization, product standardization, proprietary integration, and delivery, striving to achieve higher quality growth in the digital era. To seize the new opportunities in the industry, the company proposed to spin off CUSC, a subsidiary specialized in Internet-of-Vehicles operation in the A-share market. After being spun off as an independent listed company, CUSC's financing capability and operation of flexibility will be strengthened, accelerating its business growth and enhancing its competitiveness. As a controlling shareholder, China Unicom will benefit from its value unlocking.
In the future, strategic cooperation between China Unicom and CUSC can create strong alliance with synergetic advantages to promote mutual growth. For 5G network deployment, the company maintained a focused approach. By working closely with China Telecom, we continue to deepen network co-build co-share , delivering prominent achievements. In the first half, we sped up in-depth and indoor coverage in urban areas and achieved 5G coverage of major counties and affluent towns. We added about 80,000 shared 5G base stations with China Telecom, with the total number of 5G base stations in use reaching over 460,000 with industry-leading 5G network speed. Going forward, the company will conduct dynamic investment with due regard to technology advancement, value chain maturity, market and business demand, et cetera. 5G CapEx budget for the full year is CNY 35 billion. The number of 5G base stations in use is expected to reach 700,000 by the year-end.
Our 5G network co-build co-share with China Telecom has effectively boosted investment return for both companies. Our network edges and customers' perception were significantly enhanced. The two operators altogether achieved cumulative CapEx savings of over CNY 86 billion, and substantial savings in other costs, including tower usage fee, network maintenance costs, and utility charges, et cetera. For 4G network sharing, the number of shared base stations reached 460,000, leading to a cumulative CapEx savings of CNY 24 billion. Customers' experience saw a substantial improvement. Meanwhile, we continue to promote co-build co-share and co-maintain of transmission and other resources, and actively engaged in new co-build co-share cooperation with cable, power, high-speed railway, and oil industries, et cetera, to maximize investment efficiency. The company continued to deepen comprehensive digital transformation.
We have basically established a core capability of five middle platforms, resulting in centralized and unified IT service capabilities, as well as an efficiently centralized and integrated innovation system. Our centralized IT advantage is fast turning into an operational edge. Internally, we leverage data to power up business development, customer service, network operation, and supervision management allowing the company to greatly improve its productivity and develop a professional digital team of more than 15,000 talents during the process. Externally, we can better satisfy the nationwide service needs of government and enterprise customers, the mobility needs of individual customers, and the information consumption upgrade needs of household customers, forging differentiated new edges.
Going forward, facing a new blue ocean of digital economy spawned by new technology like 5G, the company will seize the critical window to firmly implement the strategy of focus, innovation, and cooperation, accelerate comprehensive digital transformation, strengthen intelligent operation and services, deepen mixed-ownership reform, and continuously expand in network co-build co-share and co-maintain. We will fully enhance growth quality and operating efficiency, and are dedicated to building an exceptional, smarter, and brighter China Unicom, creating greater value for shareholders, customers, and society. Next, we will have our President, Mr. Chen Zhongyue, to introduce the company's operating and financial performance in the first half of 2021.
Thank you, Chairman Wang. First, let me introduce the company's operating performance in the first half of 2021. In mobile business, the company continues to drive value enhancement and scale development with 5G. We launched the innovative China Unicom app, forming an ecology while drawing traffic through omnichannels and touchpoints. The number of monthly active users reached over 100 million. We accelerated the scale development of broadband and mobile integration via three gigabit- networks, and leveraged privileged content and financial tools to improve product value. We utilized big data to precisely drive existing customer upgrade.
We are unlocking 5G customers value through coordinated development of terminal network and business. In the first half, the company registered net addition of 42.5 million 5G package subscribers with an industry-leading penetration rate, driving sustained mobile ARPU and service revenue growth. In fixed-line business, the company grabs the boosted demand for digitization, cyberization, and intelligent transformation of the economy and society by leveraging proprietary resources and edges such as three gigabit- networks resources, cloud plus network plus applications integrated servicing capability, and efficiently centralized innovation product offerings.
We actively empower enterprise customers and enhance Smart Family customer experience, driving integrated development of innovative and fundamental businesses. In the first half, with the rapid growth of Smart Family home products and innovative businesses, our fixed-line service revenue grew by 8% year-on-year. The company focused on digitization to strengthen the development of broadband and mobile integration via three gigabit- networks. We continue to strengthen the capabilities of our Smart Community and Smart WoHome platforms and promote our Digital Village platform service, sharpening the differentiated edges for broadband business. In Northern China, we leveraged broadband to expand mobile and promoted the mutual growth dynamics. We achieved ultimate integration with high-quality service and drove paradigm shift with multiple SIM. In Southern China, we expanded broadband to boost mobile and will probably increase broadband investment to achieve focused coverage and spot transcendence.
In the first half, our smart home products revenue increased by 13% year-on-year. The penetration of broadband and mobile integration went up by 6 percentage points year-on-year. In innovative business, the company innovated 5G application product system leveraging five major components, namely industry private network, MEC, industry platform, customized service and terminal, to support over 15 industry applications. We integrated our own capability expand ecology cooperation to push forward the integrated and innovative development of 5G+ industry vertical applications. We actively explore business models and agilely address 5G industry customers' needs. We successfully developed a number of 5G lighthouse projects in key areas such as industry internet, smart mining, smart medical, and smart city, et cetera. With over 300 5G lighthouse customers nationwide, we are promoting faster 5G commercialization. In the first half, cumulative contract value of 5G industry application amounted to over CNY 1.3 billion.
The company accelerated the building of proprietary innovation platform capabilities and key products. The competitiveness and business value of our innovative business continued to gain value and momentum. First, in IT service, our proprietary research capability in key vertical progressively improved, and the business scale expanded rapidly. Second, the capability of our proprietary IoT connection and equipment management platform was further strengthened. Third, our Big Data business is leading in the industry. The company developed China Unicom Cloud as the base for digital transformation and integrated innovation, focusing on security and reliability, cloud network integration, dedicated customization, and multi-cloud collaboration. We provide customers with integrated innovative solutions, including cloud resources, cloud platform, cloud service, cloud integration, cloud interconnection, and cloud security, et cetera. For public cloud, we targeted medium, small, and micro-sized enterprises and deepened cooperation with strategic investors.
For private cloud, we consolidated our resources to focus on building PaaS with fully integrated capability and offered secure and trusted private cloud service to government and enterprise customers, leveraging information technology innovation cloud and multi-cloud platform management capabilities. For industry clouds, we deployed nationwide backbone cloud pools, aggregating innovation capabilities such as Big Data and AI. In the first half, China Unicom Cloud revenue reached CNY 7.7 billion, up by 54% year-on-year. In IDC business, the company grabbed the growth opportunities brought by the state's new infrastructure strategy. We sharpened our competitive advantages, striving for both return and scale enhancement. We built a multi-cloud intelligent network to provide customers with superior experience and all-round integrated solutions. We advanced efficiently centralized operation and leveraged our existing network resources and capabilities to capture internet sector customers while optimizing customer mix by actively expanding customers in financial and government sectors.
In the first half, our IDC revenue was CNY 11 billion, up by 9% year-on-year. In terms of investment, we focused on high-value and high-demand areas and actively engaged in private capital cooperation. Full-year CapEx budget is CNY 2.7 billion. The number of cabinets available is expected to reach 310,000. This year, the company synergetically advanced reform and comprehensive digital transformation, aiming to raise vibrancy, promote growth, and enhance efficiency. First, we developed a platform to aggregate traffic, forming a smart living new ecology integrating communication, lifestyle, entertainment, and financial services. Second, we systematically promoted reform of six professional functions to enhance the efficiency of smart operational systems, facilitating faster implementation of digital intelligence new operation. Third, we deepened mixed-ownership reform, systematically advanced market-oriented reform among subsidiaries, and introduced digital talents. The transformation of operating mechanism was accelerated, releasing the intrinsic value of the company.
Next, let's go on to our financial performance in the first half of 2021. This table shows our key financial information in the first half. Operating revenue was up by 9.2%. Net profit increased by 21%. The company's growth quality continued to enhance. Let's look at the detailed analysis next. Operating expenses increased by 9.7%, which was slightly higher than our operating revenue growth due to the higher initiatives in resources and talent for 5G and innovative businesses, paving the way for sustainable business growth. Of which, depreciation was basically flat, mainly benefiting from our good control of CapEx in recent years and network co-build co-share. We continue to promote incentive mechanism reform to strengthen performance-based compensation and draw innovative talents. Employee benefits went up by 13% year-on-year. Next, let's take a look at the detailed analysis on G&A and other operating expenses and network operation and support expenses.
The company capitalized on the opportunities of digital transformation and appropriately stepped up cost initiative to promote capability enhancement and scale development of innovative businesses. G&A and other operating expenses increased by 17%, mainly due to higher technical support expense and cost of IT services for innovative businesses, which together increased by CNY 2.7 billion. But driving CNY 5.4 billion increase in industry internet revenue and further enhancing our capabilities and potential. Going forward, the company will be devoted to promoting the scale and profitability enhancement of innovative businesses. As our business and network scale continue to grow, network pressure is mounting on network cost. The company has taken multiple measures to strengthen meticulous management, striving to achieve stable network operation and support expenses as a percentage of revenue for the full year. We continue to expand network co-build co-share with China Telecom. Second, we in-sourced network operation.
Third, we promoted AI to push smart operation. Fourth, we accelerated 2G, 3G network streamlining and frequency reduction. Fifth, we fully leveraged the favorable new infrastructure policies. Six, we actively engage in energy conservation and emission reduction. For CapEx, we insist on focus and cooperation to enhance network edges with high investment efficiency. First, we focus on the deployment of premium 5G, gigabit fiber network and innovative business investment. Second, we focus on the coverage of enterprise premium network and commercial buildings. Third, we focus on high-value areas. In addition, we continuously extend co-build co-share and co-maintain as well as private capital cooperation to drive profitable and fast business growth. In the first half, our customers' overall satisfaction significantly improved with 5G customer satisfaction ranking number one in the industry. In the future, the company will continue to invest efficiently with a full-year CapEx budget of CNY 70 billion.
With the execution of digital transformation and the advantage of mixed-ownership reform being unleashed, the company's financial position was further optimized. Our cash flow-generating capability remains strong. Since 2017, the company has accumulated free cash flow of over CNY 170 billion. Our liability to asset ratio declined from 62.9% in 2016 to 38.8% in June this year. The company's financial strength was further enhanced, helping us to capture new 5G opportunities, create new value, boost shareholder returns and counter risk in the future. Looking in the second half, the company will adhere to the strategy of focus, innovation, and cooperation.
We will further improve market-oriented operation, enhance systematic innovation capability, and accelerate digital transformation. We will endeavor to shape the five new development edges comprising high-quality services, high-quality development, highly effective governance, high-tech engine, and high vitality operations, striving to leapfrog in our high-quality development. This is the end of my presentation. Thank you.
Good day, and thank you for standing by. Welcome to China Unicom 2021 Interim Results Analyst Briefing Conference Call. At this time, all participants are in a listen-only mode. After the speaker's brief introduction, there will be a question- and- answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. Now I would like to hand the conference over to Mr. Jacky Yung, Company Secretary of China Unicom. Thank you. Please go ahead.
Thank you, Amber. Good day, ladies and gentlemen. Welcome to China Unicom's 2021 Interim Results Global Investor Conference Call. Today with us on the line, we have Mr. Wang Xiaochu, Chairman and CEO of the company, Mr. Chen Zhongyue, Executive Director and President, and Mr. Liang Baojun, Senior Vice President. [Non-English content] In the first half of 2021, the company achieved a solid growth in revenue and net profit. Service revenue increased by 7.5% year-on-year, and net profit significantly increased by 21% year-on-year to CNY 9.2 billion. We believe most of you may have seen the company result presentation on the website, and for time convenience, the management will not go through the presentation and will go straight to the questions of your interest. [Non-English content] Amber could you please pass on the first question from investor? Thank you.
Certainly. Our first question comes from Danny Chu from Bank of America. Please ask your question.
Thank you management for taking my questions. Congratulations on the results. I have three quick questions. My first question is, I saw the announcement about the potential IPO of Smart Connection Technology. Is there any reasons why we consider A- share instead of listing this entity on the Hong Kong market? A related question would be, a while ago, I believe management has talked about the potential IPO of our cloud business. Are there any update on that potential IPO as well? That would be my first question. Second question is on page nine of our presentation. I saw that both our operating revenue as well as the net profit in terms of the year-on-year growth rate far exceed the market expectation. Can management walk us through what areas do you think that the market is being too conservative as a result, the market results exceed the market expectation?
That would be my second question. The last question is about the dividend. Again, we are glad that the company announced an interim dividend for the first time. Should we interpret that, given the company said that we are going to raise our dividend payout ratio, but the exact ratio will be announced down the road, should we expect our payout ratio to be similar to our peers, given that China Telecom, they announced their FY 2021 dividend payout ratio to be 60%? That would be my three questions. Thank you.
Thank you, Danny. Yeah. [Non-English content]
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Yeah. Thank you, Chairman. The Chairman would like to explain that we have quite a number of this type of innovative company to be getting listed, and the company has chosen the Smart Connection to be the first one, because relatively speaking, it is smaller and also it is not so integrated with the fundamental business of the company. He expects the approval process for getting listed in the A-share market will be simpler and easier than the Hong Kong Stock Exchange. He thinks it is a good step one for the company to try to put forward the first number one spin-off. In fact, in future, the company will not rule out the possibility of spinning off the other company in Hong Kong Stock Exchange.
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Chairman would like to explain that the company has no plan to separately list out only the cloud business. Instead, company will be looking at our Digital Technology Company Limited, the subsidiary which will cover a number of this type of new business, including the cloud, Internet of Things, Big Data, and also blockchain and et cetera. Then the company will be trying to spin off the company as a whole.
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Yep. President Chen would like to answer the question too. He would like to emphasize that the reason why we could have the revenue growth and profit growth exceeding market expectation, mainly because we successfully implement the scale development, the value enhancement strategy. For example, he would like to lay out the mobile subscriber number. Instead of the first half of last year, it has been a net loss of 8 million, but in the first half of this year it is 4 million net add. Now the ARPU CNY 44.4 increased by 8.5%. Also the fixed line broadband subscriber, we have achieved 4 million net add in the first half of this year. While we can see about the broadband and also the smart home value business, the revenue increased by 13%, while the fixed line revenue increased by 8%.
More importantly is also the innovative business we have continued to successfully fast grow. All these contribute to our robust revenue and profit growth.
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President Chen would like to respond to the third question regarding the interim dividend. It's the first time the company paid the interim dividend. Mainly because the company have achieved very favorable operating results as well as the cash flow. Whether the company in the full year will follow the peer company to increase the dividend payout ratio to that level, it depends on the company final outcome on the profit and also the cash flow. President would like to emphasize the company has high regard for the return to the shareholders. Thank you, Danny.
Right. Thank you. Our next question comes from James Wang from UBS. Please ask your question.
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Thank you. Three questions from the investor. First of all, he congratulate the company on the good results. The first question, he would like to point out that the profit growth in the first half of 21% is very robust. He would like to know about the trend in the second half. He also like to mention that China Telecom has give guidance about in the coming two to three years time, they are able to maintain double-digit growth, He wished to see the company whether we can also make the same guidance. The second question from him, he notice about the China Telecom, China Mobile, both of them are getting back to the A-share market for offering and will be introducing strategic investors. He would like to see how the company will maintain some defensive edges on competition in respect of the government enterprise customer businesses.
The last question from him is about the EBITDA. He had noticed the company for the past several years, the EBITDA basically remains relatively flat and he wished to know when the company will be able to achieve EBITDA increases.
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Chairman would like to answer the first question. He wished to point out that all three operators in China nowadays we have quite a large scale of revenue already on a high level. Given that the fundamental businesses of the three operator are relatively saturated, now all three of us are counting on the innovative business to drive the revenue growth. He see to maintain the revenue for double-digit growth for consistently for a few years, in the coming few years, it may not be easy and it may be a challenge. However for profit, he is so confident that the second half of this year we will be able to maintain more or less the same level of profit growth as the first half year.
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Yeah. Our Senior Vice President Mr. Liang would like to address the second question, and he wished to point out that the company will leverage above our centralized unified innovative system, and which in particular comprising about our Digital Technology Company. It will integrate the various capability into trying to formulate the businesses. Also we will leverage about the mixed-ownership reform and also our talents, and in particular, we will integrate our platform to strengthen our capability to service, including 5G+ABCDE , including the [ATTTP] artificial intelligence and Big Data and computing, and also the edge computing, et cetera. In particular, we would like to cooperate with the ecosystem to try to strengthen our service.
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Chairman would like to address about the EBITDA and or EBITDA margin. He would like to point out that in fact it is so easy for the company to achieve EBITDA increase or EBITDA margin increases if we are going to slow down or reduce our investment or initiative in the innovative businesses or for example, ABCDE investment. However, the company would emphasize we would like to achieve long-term sustainable growth. As a result, we need to invest in this type of businesses. He expects one day it will come, for the revenue increases in these businesses, in the web business, will exceed the investment in this business. The profit will come and EBITDA increase.
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Thank you.
Thank you. Our next question comes from Edison Lee from Jefferies. Please go ahead.
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Thank you. Yeah, sorry. Two questions from the investor. The first one he has noticed about the industry internet business of our company. The growth has slowed down and he would like to know about the outlook about the growth in these businesses. He noticed although the company profit increased a lot, however, the EBITDA is flat. It means the profit may have come from the non-operating income, in particular the share of net profit of associate. He loves to know more about this type of associate company profit.
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Chairman would like to explain that for the industry internet businesses, in the first half year, it may look the growth has been slowed down a bit. In particular, the reason is because the company have emphasized and put more focus on trying to strengthen our digital transformation to strengthen our own capability. By September end, we will have finished about this process, and then business will get to normal. Chairman is confident that the second half growth rate of our industry business will be better than, higher than the first half year. However, he would like to point out that in the long run, of course, given that our scale of the industry internet business growing, as a result, although the absolute value of our growth will be increasing, however, the percentage level of the growth will be slowing down.
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Chairman would like to explain that given that the company has successfully decreased the financial expense and we also achieved more and more share of the net profit of associated companies, so our profit increased very robustly. As a result, we are in a good position to invest more in the innovative businesses for our future growth. We will take this golden opportunity while the EBITDA will be flat, but our profit will be increasing.
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Regarding our share of net profit in associated company or joint venture, the most performing best one will be the Merchants Union, and they have been contributing quite remarkable profit to the company for development.
Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad. Our next question comes from the line of Neale Anderson from HSBC. Please add your question.
Thank you. Good evening. One question about medium-term cash flows, please. With the co-build co-share network, it looks like your telecom CapEx could be structurally lower for the next several years and even longer. My question is whether you expect CapEx to be quite a bit lower in the future, or whether your investment in new businesses, particularly data centers et cetera, will make up some of that gap and the CapEx won't actually change that much over time. Thank you.
Thank you. [Non-English content]
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Chairman would like to explain that it really depends on whether we can obtain some good investment opportunity. For example, if the investment talking about a very low return and which is even less than the bank interest income, then of course Chairman would recommend paying the dividend back to the shareholders. However, he personally inclined and hopefully we can get some very good investment opportunity with good returns.
Thank you. The next question comes from Kai Qian from CICC. Please go ahead.
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Thank you Kai. There are three questions from the investor. First of all, beforehand he congratulates the company on the good results. The first one is he wishes to see any plan by the company to disclose the EBITDA margin or profit margin of the IDC and cloud businesses in the future, because he expects by disclosing the profit margin, it will enhance the valuation appraisal by the investor. The second question from him, he had noticed the company's cloud business revenue has been increasing quite robustly, however, which is still less than the China Telecom and China Mobile growth rate on the cloud businesses. He wishes to know any specific reason why our growth is not as good as CT and China Mobile. The last question from him is regarding the co-build co-share on the 700 MHz. He wishes to see any progress or plan on that.
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Yeah. Chairman would like to thank the suggestion from the investor. Chairman would like to say that when we consider about this type of EBITDA margin for different business segments, he would like to say that he try to avoid putting the margin into too detailed or too small business segment, because to achieve this type of segment profitability, we need to incur a lot of cost to try to divide out the exact cost or accurate cost of individual business segment. He said revenue is relatively better, but for profitability it is a little bit more cost consuming. However, he like to say that in future, when this kind of new business get into a bigger scale, then it will be a good position for the company to try to spend some cost or efforts in trying to derive some rough estimate of the profitability for different business segments.
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Chairman would like to point out that it's important to notice for cloud revenue definition, different operator may have different definitions. Also, we need to be careful to look at the cloud revenue component or composition, because maybe some cloud revenue will be counting on the cloud service provided by the other suppliers or provider. As a result, that cloud revenue will need to incur a large amount of cost to be paid to the other providers.
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Chairman also like to point out that the company started cloud business at a later stage compared with the other two operator. Originally we are counting on the SaaS to generate the revenue while we are strengthening the base for our IaaS. We have complete already this year and we have rolled out 200 products. In fact, we are counting on the proprietary capability on the IaaS basis to promote our public cloud, which will generate a better profitability.
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President would like to address the third question on the co-share of the 700 MHz. He would like to say he's confident the regulatory authority will make a fair and equitable decision on the treatment about this low frequency band allocation, and to ensure the high quality development and also the fair competition among the operators.
Right. Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question, please press star one on your telephone. Our next question comes from [Jiang Hongming] from Huatai Securities. Please go ahead.
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Yeah. Thank you. Two question from the investor, and he wish to know about the depreciation amortization regarding the 5G equipment versus the 4G equipment, whether there's any difference. Also about this type depreciation policy, and will there be have any impact on our company's profitability and cash flow?
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Yeah. Chairman would like to explain that the investor really have eye for details, and the company all along for 2G, 3G and 4G equipment, we have a depreciation life of seven years. However, for 5G, given that it is co-build co-share with China Telecom, and they have 10 years depreciation life. As a result, the company will be aligned with the China Telecom 10 years for the 5G equipment.
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Yeah. Chairman explained that in the short term, the impact will not be significant given that the asset size is still small compared with the overall asset of the company. However, in the long run, of course, this will be good to the profit profitability. However, relatively speaking, the cash flow generate from the profit will be less.
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Thank you.
Thank you. Our next question comes from Wang Xujun from Dongxing. Please go ahead.
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Two questions from the investor. The first one he would like to, of course, congratulate the strong growth result of the company. He has seen that since 2015, the CapEx peak at that year and day after, the week the CapEx has been controlled at a reasonable pace. As a result, he would expect it will have generated and led to the good result of depreciation amortization this half year is talking about flat. He loves to see any chance in the coming future about having a decreasing depreciation amortization, which will be very good for the cash flow. The second question from him is regarding the 5G penetration has been increasing a lot in the first half year, and it also contributed significantly or favorably to the ARPU acquisition. He wishes to see in the coming few quarters whether the ARPU can continue about the robust increases quarter-over-quarter.
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Yeah. Chairman would like to point out that the company has been able to maintain the good CapEx control. It mainly benefits from the focused strategy of the company, which we have implemented a few years ago, including, of course, we will try to focus our resources or investment in the key areas and the key business, mainly profitable business and profitable areas. However, just like last year, this year and next year, we will be increasing our investment in the 5G. As a result, we expect next year the depreciation will be increasing. However, if we cannot find good investment opportunity next year to invest more in the coming year, it might happen that depreciation will decrease in the year after IE 2023.
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Yeah. Chairman expect the overall 5G ARPU will be steady but still declining a bit. However, the planned mobile ARPU or subscriber will be increasing this year.
Right. Thank you. Next question comes from Tina Hou from Goldman Sachs. Please ask your question.
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Yeah. Thank you. Two questions from the investors. First of all, she congratulate the company on the good result. The first question will be on the IDC. She wish to know in the coming three years, the company have any plan for the accelerating the development of IDC in particular. The IDC is quite related to the IaaS as mentioned earlier. Second, she had noticed about this regulatory directive regarding the critical information infrastructure security. She wish to know whether the company need to incur additional investment or to recruit additional talent to satisfy the requirement.
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Yeah. Our Senior Vice President, Mr. Liang, would like to address the question on the IDC. He loves to point out the IDC is the core business of the company, and he expects the company will fasten the development IDC in the second half this year. He expects the revenue growth in the second half will be higher than the first half and will be double digits, more than double digits. Regarding the deployment about the IDC. Right now, the company has 583 sites, IDC sites nationwide, and leveraging above the 5+2+31+X, mainly five economic affluent regions, and also the two Internet data warehouses in Guizhou and also Inner Mongolia, and also the 31 capital cities, et cetera. Then plus various applications. We will focus on the government customer as well as some internet company and the finance company.
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Yeah. Chairman would like to give applause to Tina about her very updated about the data security law in China. Chairman would like to say all along the company has high regards about the data security and also the network security, information security. We have a separate security company as well a separate security department overseeing all this. Basically our company has basically complied with the requirements, and we see no significant additional cost need to be incurred to satisfy the requirements.
Thank you. Our next follow-up question comes from Edison Lee from Jefferies. Please go ahead.
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Yeah, thank you. One follow-up question from the investor is regarding on page 23 of our PPT. He has noticed about this China Unicom Cloud business revenue was CNY 7.7 billion the first half year. However, he also see on our page 37 of the PPT and the Cloud Computing revenue was CNY 2.8 billion. He wishes to know what's the difference about these two figures.
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Yeah. President would like to explain that. In fact, our China Unicom Cloud businesses include one element, which is Cloud Computing of CNY 2.8 billion, which is mainly comprising about the IaaS as well as the storage.
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Yeah. President will also further elaborate about our China Unicom Cloud businesses. It comprise mainly six elements, the cloud resources, cloud platform, cloud service, cloud integration, cloud interconnection, and cloud security. The total amount included CNY 7.7 billion, increased by 54% in the first half of this year. The definition is in line with the industry.
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Thank you.
Thank you once again, ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad. We have a follow-up question from Edison Lee, Jefferies. Please go ahead.
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[Non-English content] The follow-up question from the investor is regarding, he wants to know about the difference between the two, CNY 7.7 billion and CNY 2.8 billion, the CNY 4.9 billion, where we have put it in our accounts.
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President would like to elaborate about the allocation into the finance account. For example, when we talk about the cloud platform, it is mainly referring to the PaaS, and the cloud service, it refer to the SaaS. When we talk about the cloud integration revenue service, it refer to the IT system integration services. Also the cloud integration, cloud interconnection, and cloud security, they are also part of the IT system integration service revenue. In fact, it will be included in the IT system integration of CNY 10 billion, and also some will be included in Internet of Things revenue, and some will be included in the account, will be the Big Data revenue. Thank you.
Thank you. Our next question comes from [inaudible] from [inaudible]. Please go ahead.
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Yeah. Two questions from the investor. The first one is regarding the mobile number portability. He understand or he has heard about the China Telecom is the beneficiary of this policy, and he wish to know any impact on the China Unicom, no matter on the subscriber or revenue. The second question from him is regarding the 5G messaging services. He has heard something from the Huawei and is in progress. He wish to know any plan by the company about the 5G messaging services.
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President would like to say that the mobile number portability policy is good to the customer for them to have better choices. So far, for the first half of this year, the company has net port out. However, we have seen over the months the net port out figure has been decreasing while the port in figure has been increasing.
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Yeah. President would like to elaborate saying that the overall impact of the net port out is negligible, because overall speaking, for the whole six months, in the first half-year, the net port out figure represents 0.4% of the total subscriber number, 0.4%.
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President would also like to share a pleasant news. He has noticed about more than 10 provinces of our company, we have net port in already and is improving.
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Yeah. President would like to say the 5G messaging service is something the company have high regard to about this application. So far we are carrying out the trial before the commercial service roll out. So far so good.
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So far we have some friendly users and also some suppliers on our 2B businesses. They are participating in the trial and we are planning to go out before the end of this year.
Right. Thank you. Our next question comes from [Zhang Hong Yun] from [inaudible]. Please go ahead.
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Oh. Yeah.
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Yeah. Thank you. Two questions. The investor, he first of all congratulate the company on the good result again. Very good. First of all, he like to point out that he has noticed about the revenue growth, the profit growth of businesses is less than the revenue growth. He love to understand the reason why. The second question is he has noticed about China Mobile and China Telecom. They have done some adjustment to the residual value of certain assets, resulting in some as a write-down or accelerated depreciation. He wish to see any similar plan by the company.
Once again, ladies and gentlemen, if you wish to ask a question, please press star one on your telephone.
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Yeah. Then President would like to explain that the reason why although our profit grow very fast, although the profit grow quite fast, however, the core business profit or EBITDA seems to be quite flat. Because the company has invest a lot in our innovative businesses on the initiative as well as recruiting some talents and giving them incentives to try to drive the business grow for our long term sustainable growth. We also benefit a lot from the investment income to achieve a very robust profit growth in the first half year.
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Chairman would like to say that the asset written off among in the first half this year was CNY 1.5 billion. He would like to point out that for 2G assets, in fact, the residual value nowadays is negligible. For 5G, the amount of the residual value or the value of the 3G is talking about more than CNY 10 billion. However, it's important to keep this 3G asset because the voice will be counting on this. In particular, the non-LTE voice services, including from 5G, will fall onto the 3G network. We will at best trying to streamline the 3G network, but we will keep the 3G network. Overall speaking, the quality of the asset of the company is good.
Thank you once again, ladies and gentlemen, if you wish to ask a question, please press star one. Our next follow-up question comes from Edison Lee from Jefferies. Please ask your question.
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Yeah, thank you. A follow-up question from the investor. He is regarding the spectrum refarming, and he has noticed that the company will be using the 2.1 GHz for the 5G rollout this year. He wished to know whether there's any chance we can reallocate or refarm some existing 2G spectrum or 4G spectrum for 5G use. In that way, we can control our 5G CapEx even better.
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Yeah. Chairman would like to point out that before 6G come, he expect the 3G, 4G, 5G will coexist for a relatively long period of time. Although the company could streamline the 3G network, and in case the 5G equipment price come down in a rapid manner, the company can also streamline the 4G. He expects the 3G, 4G, 5G network will coexist for a relatively long period of time.
Great, thank you. Once again, ladies and gentlemen, to ask a question, please press star one. We have a follow-up question from [Zhang Hong Yun] from [inaudible]. Please go ahead.
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Yeah. Two questions from the investor. The first one is regarding, he has understood about the investment in the innovative business, driving down the profit, and he wants to know whether it will also similarly affect the next year and the year after profit. Also about the accounts receivable, the increase pace is faster compared with the other two operators.
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Thank you, Chairman. Chairman would like to share his view about this type of investment. First of all, he would like to point out that this non-operating income, for example, the share of net profit of associate company. In fact, they are not one off, they are sustainable. Given that their sustainable nature, we are in a good position to make investment for future growth. For example, in the new innovative businesses. Chairman would like to reiterate about his example. The company can easily enhance or increase the EBITDA margin if we are going to reduce the investment in the innovative business or investment in the future growth. However, it may not be in the best interest of the company.
For example, the Merchants Union is a very successful associate or joint venture of the company, and in fact the profit increased year- over- year, and in the first half of this year it increased by 176%. In fact, it's good to nurture more and more this type of associate company to try to enhance the overall profitability of the company.
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Yeah. Chairman would also love to explain about the bad debts. The company has make provision for the bad debts in the first half of this year on a prudent basis. We have regard to the overdue amount. However, in the general historical experience, the government and enterprise customer, generally, we can strengthen the collection from them in November and December before the year end. From historical experience, the company believes that although we have made the provision of CNY 2.7 billion in the first half of this year, about 1/3 of them, hopefully we can recover. Thank you. I think time has come for us to wrap up the meeting. Thanks again for attending the conference and thanks to the management. Should you have any more questions, please feel free to send it to our investor relation department. Thank you. [Non-English content]
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Thank you. Amber, we are done with our conference call today. You may now conclude the call. Thank you.
Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.