China Unicom Upbeat Despite Falling H1 Profits

China Unicom has suffered an expected sharp fall in profits during the first six months of the year because of heavy spending related to its 4G rollout.

The operator has struggled to keep pace with market leader China Mobile Ltd. (NYSE: CHL) on the sale of 4G services, although it claimed to have witnessed an improvement in conditions in the first half.

Net profit slumped by 79.6% compared with the year-earlier period, to around 1.4 billion Chinese yuan ($210 million), due to a rise in sale and marketing costs as well as an increase in network, operation and support expenses.

Sales at the company dropped by 3.1% over the same period, to RMB140.3 billion ($21.2 billion), although service revenues edged up 1.4%, to RMB121.9 billion ($18.4 billion).

Having reported customer losses in every quarter last year, China Unicom Ltd. (NYSE: CHU) picked up more than 8 million new customers between January and June to give it 260.7 million in total.

Its 4G customer base has now grown to about 73.9 million subscribers, although this still pales in comparison with the 4G performance of China Mobile, which finished June with more than 428 million 4G customers. (See China Mobile's 4G Boom Fuels Profit Growth.)

Want to know more about 4G LTE? Check out our dedicated 4G LTE content channel
here on Light Reading.

China Unicom's bottom-line numbers would not have surprised investors coming soon after it issued a profit warning, and did show a marked improvement on results in the second half of 2015 when the operator booked a net loss of about RMB3.36 billion ($510 million).

"The company achieved initial success in turning around the unfavorable conditions in business development and saw the emergence of positive business momentum," said China Unicom in a statement. "A more solid foundation has been built for healthy development in the future with stronger growth momentum."

China Unicom's share price barely moved in Hong Kong today, closing up just 0.12% following the publication of results.

For further analysis of the operator's first-half results, including details of its fixed-line performance, see this report on Telecoms.com.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

Mitch Wagner 8/17/2016 | 3:28:22 PM
Investment Hopefully the 4G rollout will be an investment that pays off in the future. 
Sign In