China Unicom records 34.8pc rise in net profit
Increase comes before industry restructuring
China Unicom (Hong Kong), the country's smaller mobile operator, posted a 34.84 per cent gain in net profit for the first nine months of the year even as it faced stiffer competition before an industry restructuring.
Earnings rose to 6.99 billion yuan (HK$7.94 billion) from 5.18 billion yuan a year earlier, while revenue gained 3.03 per cent to 52.48 billion yuan. Profit was also higher because a one-off loss last year related to convertible bonds was not repeated.
Unicom's CDMA mobile business, which was sold to China Telecom earlier this month, earned 1.68 billion yuan during the period, up from 654.89 million yuan. The remaining GSM business made an operating profit of 7.29 billion yuan, up 3.25 per cent from last year.
Average revenue per user, which measures an operator's profitability, dropped to 42.8 yuan per month from 46.8 yuan last year, while usage fell to 247.3 minutes from 248 minutes.
Margins on earnings before interest, tax, depreciation and amortisation fell to 42.8 per cent from 45.2 per cent a year earlier amid fierce market competition.
Earnings per share rose to 51.2 fen from 40.4 fen.
Under the telecommunications industry restructuring, Unicom's GSM mobile business and other businesses will be merged with China Netcom Group Corp, which operates fixed-line and broadband services in 10 provinces in the north. The deal was completed last week.
The third-quarter results did not include Netcom results and the CDMA unit, which was sold to China Telecom for 43.8 billion yuan last month, was treated as a discontinued business. Unicom recorded a gain from the CDMA disposal before tax of about 37.56 billion yuan.
Unicom is soon expected to obtain a 3G licence based on the proven WCDMA mobile technology. That could give it an advantage over bigger rival China Mobile, which operates a 3G service based on the less mature mainland-developed TD-SCDMA technology.
Goldman Sachs believes that issue of the 3G mobile licences remain on track for this quarter or early next year.
'Unicom, which is a smaller player in the market, is expected to have more regulatory upside than rivals China Mobile and China Telecom,' Goldman Sachs analysts wrote yesterday.
Goldman Sachs said Beijing was working on new regulations for the industry including different interconnection fees that could favour smaller players. That could also hurt the earnings of the bigger players such as China Mobile.
If the mobile interconnection charge for China Mobile is set at 3 fen per minute, down from 6 fen now, the company's earnings next year will drop 3 per cent, while Unicom's earnings will gain 17 per cent, Goldman Sachs wrote.
Shares in Unicom yesterday surged 13.19 per cent to close at HK$11.50.
