Shares of China Unicom - the mainland's second-largest telecommunications operator - jumped yesterday after the company announced better-than-expected earnings in the year to December 31. But the counter finished 10 HK cents lower at HK$8.55 on news its parent, China Unicom Group, was considering an issue of A shares. The share price had improved by as much as 60 HK cents after China Unicom reported net profit last year surged more than threefold from a year earlier to 3.23 billion yuan (about HK$3.02 billion). Analysts had forecast its earnings for the year at 1.58 billion yuan. Chairman Yang Xianzu said the parent company was reviewing the feasibility of issuing A shares to help finance its 20 billion yuan code division multiple access network in the mainland. Brokers said investors were worried that an A-share listing by the parent company could hurt expected asset-injections of China Unicom. Mr Yang dismissed these concerns. Chief financial officer Shi Cuiming said lower operating costs, plus a net gain of 390 million yuan in net interest income, bolstered the firm's bottom line. Lower leased-line expenses, personnel expenditure and telecoms equipment prices contributed to most of the savings in operating costs, Mr Shi said. Operating expenses as a percentage of total revenue last year fell to 78 per cent from 83.9 per cent in 1999. Revenue last year rose an annualised 35.8 per cent to 23.69 billion yuan, bolstered by robust growth in mobile services. The revenue contribution from mobile telephone services last year increased to 54.4 per cent of the company's total revenue from 33.5 per cent in 1999. Revenue from long distance and data services surged 12.9 times from a year earlier to 1.1 billion yuan. This revenue accounted for about 4.6 per cent of China Unicom's total. Revenue from paging services fell 15.39 per cent to 9.7 billion yuan, lowering the contribution of these funds to total revenue to 41 per cent from 66 per cent a year earlier. Mr Shi said China Unicom had budgeted 43.8 billion yuan for capital expenditure last year, but actual spending amounted to 25.1 billion yuan. Analysts said they had not expected the company to hold such large savings in capital expenditure in the period. DBS Securities analyst Wallace Cheung estimated last year's capital-expenditure savings would help China Unicom save about two billion yuan in depreciation costs. The company has set capital expenditure at 36.6 billion yuan this year, to help expand capacity. China Unicom's mobile-telephone subscriber base increased fourfold last year to 12.77 million, lifting the company's market share to 22.7 per cent from 14.2 per cent in 1999. It had about 45 million mobile-telephone subscribers at the end of last year, about 78 per cent of the market.
