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August 25, 2005 6:16 pm

Profits drop at China Unicom

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China Unicom, the country’s number two wireless operator, on Thursday said its profits fell 19 per cent year-on-year to Rmb2.33bn ($288m) in the first half of 2005 amid stiff competition and continuing losses at its flagship CDMA mobile network.

While slightly better than forecast by analysts, the first-half results highlighted the difficulties China Unicom faces in competing with China Mobile, the country’s dominant wireless carrier. China Mobile. China Mobile’s net profits climbed nearly 28 per cent year-on-year in the first half to Rmb24bn, more than 10 times its smaller rival’s, and it has been much better at attracting new subscribers.

Concerns about China Unicom’s ability to compete have fuelled recent speculation over the future of the company, which has long laboured to meet the challenge of simultaneously operating two national networks using very different GSM and CDMA technologies.

Many in the Chinese telecoms industry expect Unicom to be broken up this year by the government, which controls all four of the country’s big Hong Kong-listed operators, and its networks transferred to fixed-line carriers China
Telecom and China Netcom.

Beijing’s reclusive telecoms regulators have refused to reveal their plans, however, and Unicom said on Thurday that its first-half results showed its revenue growth was solid and its costs coming under control.

Total sales climbed 10 per cent year-on-year in the first half to Rmb43.24bn. Compared with the second half of 2004, net profits were up 45 per cent.

Unicom aims to break even with its CDMA network this year, but it suffered a Rmb458m loss in the first half compared with a small profit in the first six months of 2004. Average revenues from each of the CDMA network’s 31m users also declined to Rmb78 from Rmb91.

Profits and average revenues per user on Unicom’s GSM network, which has 90m users, were much firmer – though both also lower year-on-year.

However, some analysts said Unicom’s was making progress in shoring up GSM profits and turning around the CDMA network. “The second half should show continued improvement,” said one Hong Kong-based analyst.

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