Unicom profits fall short of expectations despite GSM additions

29 Aug 2003

China Unicom, the People’s Republic’s second largest wireless operator behind China Mobile Hong Kong (CMHK), blamed higher-than-expected costs on its failure to meet analysts’ expectations in its earnings report for the first half of 2003. Despite net profit rising 12% year-on-year to CNY2.39 billion (USD289 million), the figure was still some CNY250 million short of predictions. Group turnover rose 78% to CNY32 billion, boosted by last year’s acquisition of nine provincial GSM networks which also helped to add 9.93 million new subscribers over the period to take Unicom’s total cellular customer base to 69.64 million. Of the total, 9.98 million were signed up to the operator’s CDMA service, the country’s first when it launched amid great fanfare in January 2002. However, subscriber growth is slowing, with 3.733 million new CDMA customers over six months rendering Unicom’s original target of 13 million by year end doubtful. Analysts predict that the goal will only be attainable if the company pursues a strategy of offering heavily discounted handsets and generous tariff packages. The telco also reported 745,000 new customers for its paging service, taking its total subscriber base to 13.03 million.

Whilst mobile services account for the lion’s share of its business, Unicom’s wireline offerings continued their steady growth. In the first six months of 2003 total outgoing international and domestic long distance calls reached 8.68 billion minutes, up 52% year-on-year, as the telco increased its market share from 11.6% to 13.2%. Internet subscriptions rose 33.8% to 9.75 million, of which all but 37,000 were dial-up. Unicom disappointed investors by announcing that it would not be paying an interim dividend, in contrast to its great rival CMHK, explaining that its finance cost had risen 34% to around CNY1 billion.

China
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