China Unicom

China Unicom profit jumps on 3G subscriptions

PUBLISHED : Thursday, 25 October, 2012, 6:36pm
UPDATED : Thursday, 25 October, 2012, 6:36pm

China Unicom (Hong Kong), the country’s second-biggest mobile phone operator, posted a 27 per cent rise in third-quarter net profit after subscribers on its 3G network increased strongly, although the gain lagged estimates.

Net profit rose to 2.0 billion yuan ($320 million) in July-September from 1.596 billion yuan a year earlier, according to calculations by Reuters based on nine-month earnings data released on Thursday. That compares with a forecast of 2.2 billion yuan in a Reuters poll of seven analysts.

The earnings growth beat the 1.3 per cent profit gain posted by bigger rival China Mobile, highlighting the importance of the data business, which is more lucrative than voice services.

China Unicom added 3.17 million 3G users in September, the highest number of monthly net additions this year, according to company data.

“China Unicom has much better 3G services than China Mobile, which means they’ll have more migration from 2G to 3G and that will mean they have the opportunity to lift their ARPU (average revenue per user),” said Tsz Wang Tam, an analyst with DBS Vickers Securities.

Around 30 per cent of China Unicom’s total mobile subscribers of more than 200 million users are 3G subscribers. That percentage outpaces China Mobile’s 10 per cent but trails behind China Telecom Corporation’s near 40 per cent.

To expand its data subscriber base, China Unicom introduced earlier this month a set of data plans aimed at enticing its 2G users to upgrade to 3G, and the package is seen as the cheapest in the market, analysts said.

China has over 1 billion mobile subscribers, but less than a fifth are 3G users, with the rest using 2G technology, mostly in rural areas.

Apart from competitive data plans, mobile carriers have also been subsidising handsets to attract 3G subscribers.

Among the country’s mobile operators, China Unicom currently shoulders the smallest subsidy burden.

It started carrying Apple Inc’s iPhones in 2009 – the first Chinese mobile operator to sell the popular smartphone – and has since cut back on handset subsidies after the initial rush to gain new data subscribers with the device.

China Telecom, which introduced the iPhone just this year, is still feeling the pain of hefty subsidies.

China Mobile does not have a contract with Apple to sell iPhones. Among the iPhone models, only the latest iPhone 5 is compatible with China Mobile’s unique homegrown standard for its 3G service.

Shares in China Unicom ended 1.8 per cent higher, outperforming the main Hang Seng Index’s 0.2 per cent gain, before the earnings announcement.

China Unicom reported a nine-month net profit of 5.45 billion yuan, up from a revised 4.21 billion yuan a year earlier, and compared with a consensus forecast of 5.6 billion yuan from the Reuters poll.