China Unicom said Thursday its first half net profit rose 31.9%, thanks to strong revenue growth from its mobile business due to its swelling 3G subscriber base.
Net profit for the six months ended June 30 surged to 3.43 billion yuan ($539.8 million) from a restated 2.62 billion yuan a year earlier, outperforming rivals China Mobile and China Telecom. China Mobile reported that its net profit grew only 1.5% over the same period, while China Telecom’s net profit fell 8.3% on hefty subsidies on iPhone.
Revenue rose 20% on year to 121.69 billion yuan from a restated 101.42 billion yuan. Mobile service revenue jumped 23.4% to 60.5 billion yuan during the period, 44.5% or 26.9 billion yuan of which were from 3G service - up 140% from a year earlier.
China Unicom chairman and CEO Chang Xiaobing attributed the strong 3G revenue growth to a substantial increase in the penetration of cheaper 3G smartphones, which helped the company trim subsidy costs and reduce its reliance on Apple.
According to the company statics, 67.9% of all the W-CDMA smartphones China Unicom sold during the first half were priced below 2,000 yuan, while 19.2% were priced between 2,000-4,000 yuan and only 12.9% cost more than 4,000 yuan.
Chang said that 3G penetration in China is currently at a paltry 16% - far behind more developed countries, where 3G penetration is often higher than 60% - and expected growth in 3G users to pick up in the second half.
The company spent 3.52 billion yuan on handset subsidies in the first half, compared with 3.06 billion a year earlier. China Unicom president Lu Yimin said the amount of handset subsidies will increase in the second half, while the subsidies as a proportion of revenue will fall.
Lu also expected an increase in sales expenses as the company invested more money in building out its 3G sales channels to compete with its rivals.
As of July, China Unicom had 60.62 million 3G users and a total subscriber base of 162 million, lagging behind China Mobile, which had 68.98 million 3G users and a total subscriber base of 688 million. Smaller rival China Telecom came in the third place with 53.8 million 3G users and nearly 147 million of mobile subscribers.
While all the three mobile carriers suffered a fall in monthly average revenue per user, Unicom was leading rivals. During the first half year, Unicom’s 3G ARPU was 91.8 yuan, higher than China Mobile’s 76 yuan and China Telecom’s 74 yuan.