China Unicom decides against declaring interim dividend
China Unicom disappointed investors yesterday by failing to declare an interim dividend to make up for its poor earnings results, which showed losses in its CDMA business had yet to narrow.
Analysts had been expecting the mainland's No2 mobile-phone carrier to pay out 27 to 30 per cent of its profit to shareholders to shore up investment sentiment.
Hopes for a dividend were raised after rival China Mobile (Hong Kong) announced its first interim dividend two weeks ago to the cheers of distressed investors.
It set aside 19 per cent of first-half profit for shareholders.
In the first half, China Unicom reported earnings of 2.38 billion yuan (HK$2.23 billion), up 11.7 per cent from the same period last year but worse than market expectations.
Turnover climbed 77.6 per cent to 31.97 billion yuan, up from 17.99 billion yuan last year.
Much of the growth came from the carrier's 21.5 billion yuan acquisition of nine provincial mobile networks from parent China United Telecommunications Group at the end of last year.
However, the growth in revenue was at the low end of analyst expectations.
According to eight brokers polled by the South China Morning Post, China Unicom was expected to report revenue of between 31.65 billion yuan and 33.1 billion yuan.
The carrier said its CDMA mobile business lost 587 million yuan, marginally lower from 600 million yuan a year ago.
The carrier amortised 3.1 billion yuan in CDMA handset subsidies during the period.
Stiff competition also eroded the company's average revenue per user (arpu). For its GSM business, arpu declined 8.4 yuan or 12.4 per cent to 58.9 yuan. In the CDMA division, arpu dropped 23.5 yuan or 13.6 per cent to 148.7 yuan.
During the period, China Unicom added 3.73 million new CDMA users - or 32.7 per cent of its full-year target of 11.4 million new customers for its 20-month-old network. Total CDMA users at the end of June were 9.98 million.
It also added 6.2 million new users to its GSM network, bringing the total to 59.66 million.
DBS Vickers Securities analyst Wallace Cheung supported China Unicom's decision not to pay an interim dividend.
Unlike its rival China Mobile, the company did not have excessive cash to give to shareholders and still has a pile of debt from last year's acquisitions.
JP Morgan analyst Edison Lee agreed: 'I think it made sense that China Unicom did not pay an interim dividend because it is just getting free cash-flow positive. There is no point copying the dividend policy of China Mobile.'
On a quarter-on-quarter basis, China Unicom posted a 14.5 per cent sequential decline in earnings to 1.09 billion yuan, compared with a profit of 1.28 billion yuan in the first quarter. Its second-quarter revenue remained flat at 15.98 billion yuan.
Chairman and chief executive Yang Xianzu resigned his post yesterday. He will be replaced by president Wang Jianzhou.
