The Financial Analysis Of Telecom Operating Industry In China Under Harvard Analysis Framework

As an indispensable pillar industry, the telecommunication industry plays a major role of strategy in the development of national economy. In2008, a great change happened in the industrial pattern of Chinese telecommunication in that the plan to reconfigure the telecommunication, brewed for over five years, was initiated. The three ministries issued a joint announcement that CNC and China Unicom merge into the new China Unicom, that China Telecom incorporate CDMA from China Unicom, along with the fundamental telecommunication services of China Satcom Group, as into the new China Telecom, and that CRC join China Mobile as to form the new China Mobile. The reconfiguration has posed a three pillar situation in the field of Chinese telecommunication, leading the market into a whole new phase of development.Financial statements are the primary documents supplied by enterprises for the users of accounting information, providing information on the financial standings, the operation turnover and the cash flows in order to lay the ground for the users to make economic decisions accordingly. The Harvard Analytical Framework, devised by three colleague scholars at Harvard University, namely Krishna G. Palepu, Paul M. Healy, and Victor L. Bernar, aims to provide a financial statement analysis from a strategic perspective, primarily working with four constituents, respectively strategic analysis, accounting analysis, financial analysis and prospect analysis.The present research applies the Harvard Analytical Framework to analyze the annual reports published in recent five years by China United Telecommunications Co. Ltd.(for short, China Unicom). As one of the three pillars of Chinese telecommunication industry, China Unicom offers its financial data with both the common characteristics of the industry and its unique traits. Analysis of the financial standings, the operation turnover and the cash flows of China Unicom in the past five years should be of valid reference value for the users of the financial information, such as the investors, the creditors and the government, by displaying the variations and trends of key financial index and the explanations of the innate lexical relations and the cause of all financial indicators. In the meantime, an overview on the marching of China Unicom in recent five years from a financial perspective helps in recognizing its status in the industry and detecting its development direction. Furthermore, by scrutinizing the condition of the corporation, this study attempts to outline the whole prospective picture of the telecommunication industry.The structure of the paper will be organized as below. The first chapter as introduction will primarily demonstrate the background and significance of the project and also sketch a preview of the outline. The second chapter will carry on the strategic analysis with SWOT analysis by relating the recent development of China Unicom to the current condition of the entire telecommunication industry after the reconfiguration. The third chapter of accounting analysis will select the crucial accounting policies according to the nature of the industry. The fourth chapter includes financial statement analysis, ratio analysis and Du Pont Analysis into the financial analysis. For the financial statement analysis, the financial statistics of the balance sheets and income statements will be compared vertically, while the ratio analysis horizontally compares the financial indicators of China Unicom with the other two major telecommunication operators, specifically in their solvencies, operation capacities, their profitability and growth potentials. The application of Du Pont Analysis system is aimed to sort out the interior connections between key financial indicators so as to evaluate systematically and comprehensively the financial standings and the results of operations of China Unicom. The last chapter focuses on the prospect analysis. On one hand, the development trend of China Unicom will be addressed by examining at the same time the general business conditions of the company and the former results of strategic analysis, accounting analysis and financial analysis. On the other hand, the overall industry prospects of Chinese telecommunication operations will also be assessed.