China Unicom plans spending lift as profits fall

PUBLISHED : Wednesday, 30 March, 2011, 12:00am
UPDATED : Wednesday, 30 March, 2011, 12:00am

China Unicom (Hong Kong) will boost capital spending this year to expand its 3G, Wi-fi and fixed-line broadband infrastructure nationwide, after posting a decline in profit last year.

The mainland's second-largest mobile network operator yesterday reported a 59.7 per cent decrease in net profit last year to 3.85 billion yuan (HK$4.57 billion) owing to high depreciation and amortisation, network operation and support, marketing and selling, and administrative expenses.

That was higher than the 2.5 billion yuan profit forecast by Deutsche Bank's Hong Kong analysts, but lower than the market's consensus estimate of a 4.4 billion yuan gain.

Revenue increased 11.3 per cent to 171.3 billion yuan, from 153.95 billion yuan a year earlier, because of growth in its 3G business and a change in accounting policy related to promotional, or subsidised, handset packages to new subscribers.

Under a so-called relative fair value method, Unicom immediately recognises revenue based on the sale of the handset and the actual use of mobile services by each new customer. Deutsche Bank said 'front-loading of revenues' also resulted in higher profitability.

The Unicom board proposed to pay a final dividend of eight fen per share, or 1.89 billion yuan, on or about June 22, subject to stockholders' approval.

Chairman and chief executive Chang Xiaobing said revenue from the 3G business grew an average 40.2 per cent each quarter last year, with the monthly average revenue per user at 124 yuan.

The company had 14.06 million 3G subscribers as of December, with 11.32 million new users added last year.

The combined 2G and 3G subscribers as of December was 167.43 million, up 13.4 per cent year on year.

'In 2011, the company will launch HSPA+ in major cities,' said Chang, describing the 3G network upgrade known as Evolved High-Speed Packet Access, which will raise data transfer speeds to 21 megabits per second from the current 14.4Mbps.

The carrier will increase capital spending this year to 73.8 billion yuan, compared with 70.19 billion yuan last year.

Unicom, the sole mainland carrier-partner for Apple's iPhone, expects expansion and sale of Research In Motion's BlackBerry devices to help add 25 million new 3G users this year.

Macquarie Securities in Hong Kong forecast that Unicom could sign up to 30 million new 3G users this year.

Cost of business

The mainland's second-largest mobile network operator posted a decline in net profit, in yuan, last year to: 3.85b yuan