China Unicom (
CHU) has announced interim 2009 results with reported net income of RMB6.6 billion (US$970 billion) or RMB0.28 per share, down 42.1% compared to RMB12.1 billion (US$1.8 billion) or RMB0.51 per share reported in the corresponding period a year-ago.
This significant year-over-year decline in profitability is due to erosion in fixed-line revenue, higher marketing and capital expenditures associated with deployment and expansion of 3G wireless services, and intense domestic competition. Capital spending for expansion of its 3G network grew 17.1% year over year to RMB10.1 billion (US$1.5 billion) during the first-half of 2009 while associated marketing expenses increased 6.6% to RMB9.7 billion (US$1.4 billion).
China Unicom contends with an increasingly competitive domestic wireless market. The second-largest Chinese wireless carrier remains significantly challenged by the aggressive nationwide 3G service roll-out plans of its peers
China Mobile (
CHL) and
China Telecom (
CHA).
Consolidated revenue for the period was RMB76.3 billion (US$11.2 billion), down 6.3% year over year due to weak contribution from the fixed-line business. The reported consolidated service revenue decreased 4.3% year over year to RMB74.5 billion (US$10.9 billion).
Service revenue from the GSM mobile business increased 5.7% year over year to RMB34.2 billion (US$5 billion). However, this was more than offset by 11.3% annualized decline in fixed-line service revenue that reached RMB40.2 billion (US$5.9 billion). On a positive note, revenue from the fixed-line broadband service grew 10.3% year over year to RMB11.7 billion (US$1.7 billion).
At the end of the first-half of 2009, China Unicom had approximately 140.38 million GSM subscribers with a net addition of 7.01 million for the period. The company’s broadband subscriber base increased by 4.83 million to 34.91 million while erosion in legacy fixed-line subscriber base continued with a loss of approximately 1.12 million customers, taking the total customer base to 108.45 million.
The company is progressing with diversification beyond traditional voice services through the expansion of its value-added services, which are offering important revenue streams. Its GSM mobile value-added business, including SMS, GPRS and ring-tone services, posted respectable growth in first-half 2009. Total GSM SMS volume grew 0.9% year over year to 38.4 billion while ringtone subscriber base increased by 5.2 million to 49.4 million.
