Unicom profits plunge 60% on 3G rollout costs

Full-year profit at China Unicom plunged by almost 60 percent in 2010 as the costs of rolling out 3G took its toll on the country’s number-two operator. Profit fell to CNY3.85 billion (US$586.5 million), down 59.7 percent from 2009, which it attributed to “network scale expansion and the initial stage of the 3G business operation.” Revenue was up 11.3 percent to CNY171.30 billion – above the average CNY168.09 billion forecast in a Wall Street Journal analyst poll –  but EBITDA also fell slightly (0.4 percent) to CNY59.59 billion. Unicom alerted investors back in January than profits would be down more than 50 percent. The operator was able to use growth in its mobile business to offset declines in its legacy fixed business. Mobile revenue for the year came in at CNY89.55 billion, an increase of 24.4 percent and overtaking fixed revenues, which declined 1.2 percent to CNY80.06 billion. However, Unicom said that declines in its fixed business had “slowed” due to growth in fixed-line broadband.

In a statement, Unicom defended its disappointing profits, claiming it had “persisted in its unified 3G operating strategy in brands, services, package, tariffs, handset policies and service standards” and “devoted efforts to fully leverage on the advantage of the WCDMA industry chain.” The operator added more 3G (WCDMA) than 2G (GSM) subscribers in 2010 (11.318 million compared to 8.521 million), bringing its 3G total to 14.06 million and its 2G total to 153.366 million. Moreover, 3G ARPU for the year was recorded at CNY124, over three times the CNY39.5 for its 2G customer base. However, total 3G service revenue was just CNY11.59 billion, compared to CNY70.77 billion for the GSM business. Separately, it was reported this week that the operator will launch HSPA+ services in 56 cities by May 17, supporting theoretical peak downlink speeds of up to 21 Mb/s.

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