China Unicom's Net Plunges 60%

MARCH 30, 2011   THE WALL STREET JOURNAL

By OWEN FLETCHER And CHESTER YUNG

BEIJING—China Unicom (Hong Kong) Ltd. said Tuesday its net profit fell 60% last year as the company spent heavily on handset subsidies to attract users to its third-generation mobile services.

The results mark the second consecutive year for which China Unicom's net income has dropped by more than half, as the company has made significant investments to introduce its 3G business. China Unicom, the country's second-largest mobile operator by subscribers after China MobileLtd., has faced growing competition in the mobile area since it sold its code-division-multiple-access mobile business to China Telecom Corp. in 2008 and transformed into a nationwide full-service operator offering fixed-line, broadband and mobile services.

China Unicom is competing with China Telecom and China Mobile to attract users for 3G services, which offer faster data speeds and higher revenue per user.

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A man passes a China Unicom (Hong Kong) Ltd. phone booth in Beijing on Tuesday.

China Unicom said its net profit fell to 3.85 billion yuan ($586.5 million) last year from 9.56 billion yuan in 2009. Revenue rose 11% to 171.3 billion yuan from 153.95 billion yuan.

The company warned in January that it expected its net profit to have fallen by more than half last year, despite growing revenue, because of rising costs for 3G handset subsidies and high depreciation and amortization fees.

The company set its capital-expenditure budget for 2011 at 73.8 billion yuan, up slightly from 2010 spending of 70.2 billion yuan.

China Unicom's supply of Apple's iPhone 4 handsets remains adequate despite the earthquake in Japan, Chief Executive Chang Xiaobing said at a news briefing. The quake has disrupted supply chains for some device makers.

"It is difficult to predict the long-term impact," Mr. Chang said.

Mr. Chang also said the company has no timetable yet to offer Apple's iPad tablet computer. Apple already sells the iPad in China, but only versions without third-generation mobile connectivity, and China Unicom doesn't yet offer the devices. Unicom, the sole telecommunications carrier to offer the iPhone in mainland China, said last year that it hopes to offer the iPad as soon as possible.

An Apple spokeswoman declined to comment.

China Unicom will offer services for BlackBerry devices from Research In Motion Ltd. by June, China Unicom President Lu Yimin said.

Mr. Lu said China Unicom aims to add at least 35 million mobile users this year, including at least 25 million 3G users. The company had 16.7 million 3G users and 154.9 million users of its second-generation mobile services at the end of February. That trails China Mobile's 24.5 million 3G users at the end of February.

China Unicom recommended a final dividend of eight fen a share, down from 16 fen a year earlier.