Friday, Chinese telecommunication services provider China Unicom (Hong Kong) Ltd. (CHU) reported a 45.2% fall in profit for the first half of fiscal 2009, hurt mainly by the impact of corporate restructuring and intensified industry competition. The company's Board has decided not to pay an interim dividend. The second-largest mobile phone operator in China also said it reached a three-year agreement with Apple Inc. (AAPL) to sell iPhone in China, with the initial launch expected in the fourth calendar quarter of 2009.
China Unicom's first-half profit was RMB 6.62 billion or RMB 0.28 per share, lower than prior year's profit of RMB 12.09 billion or RMB 0.51 per share. The company's prior year results were restated to reflect a number of business combinations, including its merger with fixed-line operator China Netcom Group Corp. in October.
The company's last year's results included profit from discontinued operations of RMB 654 million or RMB 0.03 per share, related to the sale of its CDMA business to China Telecom.
On a continuing operations basis, first-half profit fell 42.1% to RMB 6.62 billion or RMB 0.28 per share from RMB 11.44 billion or RMB 0.48 per share in the prior year period.
The company said the latest first-half results included certain non-recurring and non-comparable factors, comprising deferred fixed-line upfront connection fees of RMB 0.28 billion, a gain of RMB 0.02 billion from the non-monetary assets exchange, and the lease fee of RMB 0.91 billion for the telecommunications networks of 21 provinces in southern China.
Meanwhile, prior-year results included deferred fixed-line upfront connection fees of RMB 0.51 billion, and a gain of RMB 0.61 billion from the non-monetary assets exchange.
Excluding items, first-half profit, on comparable basis, declined 33.2% year-over-year to RMB 6.99 billion.
Revenue for the period declined to RMB 76.32 billion from RMB 81.46 billion in the same period last year.
Telecommunications service revenue fell 4.3% year-over-year to RMB 74.51 billion, and comparable Telecommunications service revenue dropped 3.3% to RMB 74.23 billion.
Service revenue of the mobile business grew 5.7% to RMB 34.19 billion, while service revenue of the fixed-line business fell 11.3% from last year to RMB 40.19 billion. Of the revenue from the fixed-line business, revenue from the fixed-line broadband service was RMB 11.73 billion, up 10.3% from the same period last year.
During the first half, the company's information communication technology services and other revenue fell to RMB 1.15 billion from last year's RMB 2.90 billion. Revenues from sales of telecommunications products was RMB 660 million, down from RMB 711 million in the prior year.
In the mobile business, net addition of subscribers was 7.012 million for the first half, resulting in total number of subscribers of 140.377 million at the end of first half. Monthly average minutes of usage, or MOU, per subscriber was 248.9 minutes and monthly average revenue per user, or ARPU, was RMB 41.7, representing a decline of 4.3% over the same period of last year.
In the fixed-line business, net addition of broadband subscribers was 4.832 million, taking the total subscriber number to 34.913 million at the end of first half. ARPU of broadband business was RMB 60.2, down 13.5% from the prior year. Net reduction of local telephone subscribers was 1.118 million and the number of local telephone subscribers was 108.452 million, while the ARPU of local telephone business was RMB 32.0.
In the first half of 2009, total costs and expenses, including finance costs, interest income and other income-net, rose 1.3% to RMB 67.69 billion. Networks, operations and support expenses grew 17.1% to RMB 10.11 billion, in line with the large-scale expansion of networks facilities and base stations, and selling and marketing expenses were RMB 9.66 billion, up 6.6% from last year, reflecting the intensive market competition, the launch of 3G and full service brands and other factors.
Commenting on the results, China Unicom said in a statement, "In the first half of 2009, the Chinese macroeconomy continued to encounter various challenges brought by the international financial crisis. With the restructuring of telecommunications industry and the issuance of the 3G license, industry competition environment has become increasingly complicated. In the first half of the year, the Company actively pushed forward its internal integration, leveraged on the advantage of full-service resources and stepped up efforts in business expansion."
Among peers, China Mobile Ltd. (CHL), China's largest mobile phone operator, last Thursday reported that profit for the half year increased to RMB 55.33 billion or RMB 2.72 per share from RMB 54.55 billion or RMB 2.68 per share in the previous year, as revenues grew 8.9% to RMB 212.91 billion, helped by "continued growth in customer base, value-added business and voice usage volume."
China Telecom Corp. Ltd. (CHA) Thursday reported that first half, profit, including amortization of upfront fees, attributable to equity holders of the company was RMB 9.004 billion or RMB 0.11 per basic share. Excluding amortization of upfront fees, profit attributable to equity holders of the company declined 27.5% to RMB 8.412 billion or RMB 0.10 per basic share. The Beijing, China-based company's operating revenues for the half year were RMB 103.146 billion. Excluding the amortization of upfront connection fees, operating revenues increased 14.8% to RMB 102.554 billion, and revenues from wireline broadband access increased 18.2% to RMB 22.745 billion.
Further, China Unicom said its Board of Directors has decided that no interim dividend will be paid for the first six months of 2009.
Looking ahead, Chang Xiaobing, China Unicom's Chairman and Chief Executive Officer, said, "In the second half of the year, the Company will implement various effective measures to maintain the steady growth of its mobile business and mitigate the decline of its traditional fixed-line business. The Company will endeavor to promote the rapid growth of its mobile value-added service, fixed-line broadband internet service and integrated services, increase revenue contribution from non-voice and new services."
Earlier, on May 17, the company officially initiated 3G pre-commercial friendly trial in 56 cities as scheduled and launched various 3G services, including mobile internet, mobile search, mobile music, mobile TV, video telephony, mobile newspaper and wireless internet access card. The company noted that at present it has undertaken 268 cities for pre-commercial friendly trial.
The company now said that it highly emphasizes on 3G business and will step up its efforts on network construction and optimization, continuous product innovation, and improvement on sales and marketing and handsets strategies. Also, it will continue to push forward the 3G pre-commercial trial and aims for a successful launch of 3G business within the year.
China Unicom now expects that with the same amount of capital expenditure planned on the 3G network construction for the year, it could expand the number of cities covered by 3G network to 335 cities from previously planned 284 cities, as the construction cost was reduced due to bulk purchase and the synergistic effect on networks.
Regarding its deal with Apple, China Unicom said the three-year agreement to sell iPhone in China will provide its users with brand new communication and information experience. China is the world's largest mobile market in terms of subscribers.
Meanwhile, the Wall Street Journal reported, citing a news briefing by Chang Xiaobing, that China Unicom will offer two versions of the third-generation iPhone in the fourth quarter. The phone will be sold with its Wi-Fi Internet function disabled, which is required by Chinese regulations.
CHU closed Thursday's regular trading session at $14.08, up $0.32, on a volume of 6 million shares. In the pre-market activity, shares increased $0.61 or 4.33% to $14.69.
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