Unicom net plunges 60% on heavy subsidies

Fiona Chau
30 Mar 2011

China Unicom said its net profit plunged 59.7%, as the cost of rolling out 3G services took its toll on the country’s number two mobile carrier.


Net profit for 2010 fell to 3.85 billion yuan ($587 million) from 9.56 billion yuan a year earlier. Operating revenue rose 11% to 171.30 billion yuan from 153.95 billion yuan.


Mobile service revenue for the year totaled 82.36 billion yuan, an increase of 18% and overtaking fixed-line service revenue – which declined 0.4% - for the first time, the company said.


The results, which came in slightly above analysts forecasts, mark the second year for which Unicom's net profit has more than halved, as the company has spent heavily on handset subsidies to attract more users to its 3G (W-CDMA) services.


The operator spent 3.17 billion yuan on 3G handset subsidies, with 80% of this spent in the second half due to the increased sales of iPhone 4.


“The iPhone has been a key element in the development of our 3G business,” Unicom president Lu Yimin told a media briefing on Tuesday. “It has been the main driver for our 3G subscriber growth since the third quarter.”


Lu said Unicom aims to add at least 35 million mobile users this year, including at least 25 million 3G subscribers – similar to rival China Mobile, which also plans to attract over 25 million new 3G users this year.


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