China Unicom has revealed that its net profit for the first quarter fell 4.2% to 3.16 billion yuan ($510 million), as a result of the replacement of a previous business tax with a value-added tax (VAT).
Service revenue fell 5.6% to 60.26 billion yuan, mainly due to the impact of the VAT reform. Total revenue fell from 76.47 billion to 74.3 billion over the same period.
Mobile revenue took the brunt of the damage, declining nearly 10% to 36.62 billion yuan. Fixed line revenue by contrast grew 4.3% to 23.16 billion yuan.
Despite the revenue hit, China Unicom said its revenue structure continued to optimize during the first quarter.
The operator's ebitda also grew 5.6% to 25.35 billion yuan, but earnings per share decreased to 0.13 yuan from 0.14 yuan.
The operator's mobile subscriber base declined by 1.6 million during the quarter to 294.75 million. But mobile broadband (3G and 4G) subscribers grew by over 800,000 to nearly 151.4 million.
China Unicom also added 375,000 fixed broadband subscribers to take its total base to 69.6 million, as well as 579,000 local access subscribers for a total of 80.3 million.
The Chinese government first announced in March last year that it plans to impose VAT on telecom services to replace an existing 3% business levy. At the time, analysts estimated that the tax could negatively impact local operators' profits by around 9%.