China Unicom continues to lose out to bigger rival China Mobile in the country's burgeoning mobile data market, reporting a disappointing set of financial results for the first nine months of the year. (See China Unicom Loses Out to Rivals.)
Although China Unicom Ltd. (NYSE: CHU) received new 4G licenses earlier this year, the gap between the two operators in the 4G market still appears to be widening.
China Unicom does not actually break out details of 4G subscriber numbers but in release published earlier today it did reveal that its overall number of mobile broadband customers had grown to 172.5 million by the end of September from 149.1 million at the end of last year.
In many other markets the addition of 23.4 million mobile broadband customers in a nine-month period would be remarkable, but China Mobile Ltd. (NYSE: CHL) managed to sign up more than 150 million 4G customers alone over the same period and now has a total of 90 million on its books.
And it's not just on customer growth that China Mobile and China Unicom are moving in different directions.
On a year-on-basis, the latter's revenues have fallen by 1.6% over the first nine months of the year, to 211.9 billion Chinese yuan ($33.3 billion), while its net profit is down 22.6%, to RMB8.2 billion ($1.3 billion).
By contrast, China Mobile saw revenues grow by 6.5%, to RMB512.8 billion ($80.7 billion), and net profit increase by 3.4%, to RMB85.4 billion ($13.4 billion), over the same period.
China Unicom blamed the impact of new taxes for the earnings setbacks but it has clearly been hit by subscriber losses this year, its overall number of mobile customers falling from 299.1 million at the end of 2014 to 287.6 million in September.
China Mobile had also complained about the effect of taxation when reporting figures for the first six months of the year, but it appears to have overcome these difficulties and made good progress on reducing its operating expenses. (See China Mobile Profit Dips on 4G Costs, Tax.)
What is especially disappointing about China Unicom's performance is that the rate at which it has been signing up mobile broadband customers has slipped from about 5 million per month in June to 4.8 million in September.
That compares with average monthly growth of 19.3 million 4G customers at China Mobile in the third quarter.
Along with China Telecom Corp. Ltd. (NYSE: CHA), China's smallest mobile operator, China Unicom received licenses to operate the FDD version of 4G technology earlier this year.
The FDD standard uses one spectrum channel for uplink communications and one for the downlink, while TDD technology -- which China Mobile has used to build its 4G lead -- relies on a single slot for everything.
FDD benefits from a bigger ecosystem than TDD because it is more commonly used in other parts of the world, and yet China Unicom's introduction of FDD technology has clearly not helped the operator to close the 4G gap with China Mobile. (See China Mobile's 4G Roll.)
Earlier this month, China's three mobile operators announced plans to pool $34.5 billion of equipment assets in China Tower, an infrastructure business they first set up in July 2014. (See Telcos pool $34.5B of assets in China Tower.)
The government-backed scheme is intended to aid the development of China's telecom market while allowing operators to reduce costs and focus more heavily on customer service.
Nevertheless, stock movements in the wake of the deal suggested there was skepticism it would restore much balance to the market -- with China Mobile's share price rising but China Unicom and China Telecom both witnessing declines.
Shares in China Mobile and China Unicom fell by around 3% in Hong Kong today due to concern about a slowdown in the Chinese economy.
— Iain Morris, , News Editor, Light Reading