China Unicom to make first dividend payment

2 Apr 2003

China Unicom has revealed that it will make its first ever dividend payment of CNY0.10 per share – equivalent to a yield of 27.5% – considerably higher than the CNY0.07 forecast by analysts. The Chinese fixed line and mobile operator has also reported profit for 2002 of CNY4.57 billion (USD586 million), up 2.5% year-on-year. Unicom is confident of its ability to maintain dividend payments, despite industry concerns over the future growth prospects of its current-generation CDMA service launched in January 2002. The service witnessed a slow start but subscriber additions began to pick up in mid-year when the cellco introduced handset subsidies and a series of other promotions to attract interest. Although the strategy worked with monthly subscriber gains peaking at a healthy 35% last September, the company’s growth rate waned considerably once special incentives had been removed, falling to 13.4% in January 2003 and just 6.7% in February. Furthermore, promotions designed to attract customers affected Unicom’s monthly ARPU from CDMA customers, which stood at CNY172.2 in 2002, but declined to around CNY98 when promotional subsidies were taken into account. However, the firm’s main rival China Mobile (Hong Kong – CMHK) is also experiencing declining ARPUs as it struggles to win the race for new subscribers, fuelling speculation that future growth within the Chinese mobile market – the largest in the world – may not be as spectacular as first predicted.