Savings on finance and marketing costs lift Unicom earnings
China Unicom, the nation's smaller mobile operator, said first-quarter profit rose 41 per cent on finance and marketing savings.
Net profit jumped to 1.96 billion yuan in the three months to March from 1.38 billion yuan a year earlier, as revenue rose 3.9 per cent to 23.85 billion yuan. Earnings per share rose 20 per cent to 13.2 fen from 11 fen.
Profit received a boost from the issue of US$1 billion worth of convertible bonds to SK Telecom of South Korea in July that yielded an unrealised gain of 150 million yuan from changes in the bonds' fair value.
The convertible bonds also helped cut Unicom's finance costs during the period by 72 per cent to 60 million yuan from 217 million yuan a year earlier.
Selling and marketing costs fell 12 per cent to 4.4 billion yuan from 5.1 billion yuan a year earlier.
'The drop in selling and marketing costs was mainly due to a cut in CDMA handset subsidies,' said Wong Chi-man, a telecommunications analyst at Everbright Securities.
Earnings before interest, tax, depreciation and amortisation before the unrealised gain from the convertible bonds rose 8.2 per cent year on year to 8.29 billion yuan from 7.67 billion yuan.
Total mobile service revenue grew only 2.2 per cent to 21.6 billion yuan, as the company faced tough competition from China Mobile. GSM service revenue, which accounted for 63 per cent of group sales, rose 5.4 per cent to 15.08 billion yuan. The pre-tax operating profit climbed 15 per cent to 2.22 billion yuan.
The GSM services' average revenue per user dropped 5.2 per cent from a year earlier to 46.8 yuan, while average monthly usage grew 8.7 per cent to 237 minutes.
'Unicom's GSM revenue growth rate [of 5 per cent] is much slower than China Mobile's [19 per cent]; this implies Unicom was still competing only in the low-spending users market,' Mr Wong said.
Unicom's CDMA service revenue fell 4.3 per cent to 6.52 billion yuan, while pre-tax profit jumped 183 per cent to 340 million yuan on a cut in handset subsidies.
Unicom shares closed 0.69 per cent higher yesterday at HK$11.66 before the results announcement.