Unicom net sinks as 3G cost takes toll

Fiona Chau
25 Mar 2010

China Unicom’s net profit dived 73% in 2009, resulting from heavy investment in 3G and the declining fixed-line voice business, the company said on Wednesday.

The result fell short of forecasts, and while the company plans to cut network spending this year, it expects to increase handset subsidies.

Excluding the 26.1 billion yuan gain from the sale of its CDMA unit in 2008, net profit of 9.6 billion yuan ($1.4 billion) was down 35%, China’s No. 2 mobile carrier said.

Unicom, which launched its commercial 3G service in October, had 2.74 million 3G subscribers at the end of 2009, of which 83.7% were handset subscribers, generating 769 million yuan in revenue. Although Unicom was lagging behind rivals China Mobile and China Telecom in 3G subscribers, it had the highest APRU ( 141.7 yuan) among the three.

China Unicom chairman and CEO Chang Xiaobing said the company will cut its capex from 112.5 billion yuan last year to 73.5 billion yuan. 3G investment will be reduced by 37% to 23 billion yuan, while 2G investment will be trimmed down to 8 billion yuan, down 61.2% on 2009.

Chang said mobile services, especially 3G, will be the company’s major growth driver and expects its 3G subscribers to reach 10 million by year-end.

He said “the company will increase handset subsidies and cut its tariff if necessary” to boost its 3G takeup.

Apart from the mobile services, broadband revenue grew 15% to 23.9 billion yuan as subscriber numbers grew 28.2% to 38.5 million.

Chang expected that broadband and data services will be another growth driver for the company, while fixed line voice services will continue to shrink. In 2009 fixed line subscribers drooped 6.2% to 102.8 million, with voice revenues falling 17.6% to 47.3 billion yuan.

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