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October 29, 2010, 6:03 AM EDT
By Bloomberg News
(Updates with comment from analyst in fourth paragraph.)
Oct. 29 (Bloomberg) -- China Unicom (Hong Kong) Ltd., the nation?s second-largest mobile-phone company, posted profit that missed analysts? estimates because of rising costs to attract smartphone users.
Third-quarter net income fell 73 percent to 742 million yuan ($111 million) from 2.72 billion yuan a year earlier, according to figures derived from nine-month earnings reported today. The Beijing-based company was expected to post profit of 1.1 billion yuan, based on the median of four analyst estimates in a Bloomberg News survey.
Chairman Chang Xiaobing has struggled to take advantage of his carrier?s role as the only one in China offering Apple Inc.?s iPhone and third-generation wireless network technology that analysts say is superior to that of the industry leader, China Mobile Ltd. Unicom?s iPhone 4 rollout last month helped little as the company still added about 38 percent fewer 3G users than China Mobile in the third quarter.
?The problem is really the handset subsidy on iPhone 4,? said Jim Tang, who rates the shares ?outperform? at Shenyin Wanguo Securities Co. in Shanghai. ?The handset subsidy burden is really there, and the growth of subscriptions is really low.?
Tang estimates the iPhone 4 subsidy is about 4,000 yuan a unit.
Fourth Quarterly Drop
The company spent 2.99 billion yuan on handset subsidies in the first nine months of the year, including 1.82 billion yuan in the third quarter, it said today. Unicom will spend between 3 billion yuan and 5 billion yuan on the subsidies this year, President Lu Yimin said in May.
Profit fell from a year earlier for a fourth straight quarter. Revenue rose 11 percent to 43 billion yuan from 38.6 billion yuan, beating the median estimate of 42.8 billion yuan in the Bloomberg survey.
Unicom fell 0.5 percent to close at HK$11.02 in Hong Kong trading before the announcement. The shares have gained 7.2 percent this year.
The company added 2.99 million 3G users in the third quarter for a total of 10.6 million, according to Bloomberg calculations of company data released this month. China Mobile added 4.82 million 3G users in the same period, bringing its total to 15.3 million. Unicom had a total of 162.1 million mobile subscribers at the end of June, compared with 569.8 million for China Mobile.
?It is confounding why the company only saw such a tiny increase in 3G net adds,? Alan Hellawell, a Hong Kong-based analyst at Deutsche Bank AG, wrote in an Oct. 25 report. He rates the shares ?sell? and doesn?t own any.
China Mobile, the world?s biggest phone carrier by market value, on Oct. 20 posted third-quarter net income that rose 3.5 percent to 29.6 billion yuan, missing analysts? estimates.
China Telecom Corp., the nation?s biggest fixed-line carrier and third-largest mobile company, yesterday reported third-quarter profit that beat analyst estimates by rising 27 percent to 3.78 billion yuan.
--Edmond Lococo. Editors: Garry Smith, Terje Langeland
To contact the reporter on this story: Edmond Lococo in Beijing at elococo@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
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(Updates with comment from analyst in fourth paragraph.)
Oct. 29 (Bloomberg) -- China Unicom (Hong Kong) Ltd., the nation?s second-largest mobile-phone company, posted profit that missed analysts? estimates because of rising costs to attract smartphone users.
Third-quarter net income fell 73 percent to 742 million yuan ($111 million) from 2.72 billion yuan a year earlier, according to figures derived from nine-month earnings reported today. The Beijing-based company was expected to post profit of 1.1 billion yuan, based on the median of four analyst estimates in a Bloomberg News survey.
Chairman Chang Xiaobing has struggled to take advantage of his carrier?s role as the only one in China offering Apple Inc.?s iPhone and third-generation wireless network technology that analysts say is superior to that of the industry leader, China Mobile Ltd. Unicom?s iPhone 4 rollout last month helped little as the company still added about 38 percent fewer 3G users than China Mobile in the third quarter.
?The problem is really the handset subsidy on iPhone 4,? said Jim Tang, who rates the shares ?outperform? at Shenyin Wanguo Securities Co. in Shanghai. ?The handset subsidy burden is really there, and the growth of subscriptions is really low.?
Tang estimates the iPhone 4 subsidy is about 4,000 yuan a unit.
Fourth Quarterly Drop
The company spent 2.99 billion yuan on handset subsidies in the first nine months of the year, including 1.82 billion yuan in the third quarter, it said today. Unicom will spend between 3 billion yuan and 5 billion yuan on the subsidies this year, President Lu Yimin said in May.
Profit fell from a year earlier for a fourth straight quarter. Revenue rose 11 percent to 43 billion yuan from 38.6 billion yuan, beating the median estimate of 42.8 billion yuan in the Bloomberg survey.
Unicom fell 0.5 percent to close at HK$11.02 in Hong Kong trading before the announcement. The shares have gained 7.2 percent this year.
The company added 2.99 million 3G users in the third quarter for a total of 10.6 million, according to Bloomberg calculations of company data released this month. China Mobile added 4.82 million 3G users in the same period, bringing its total to 15.3 million. Unicom had a total of 162.1 million mobile subscribers at the end of June, compared with 569.8 million for China Mobile.
?It is confounding why the company only saw such a tiny increase in 3G net adds,? Alan Hellawell, a Hong Kong-based analyst at Deutsche Bank AG, wrote in an Oct. 25 report. He rates the shares ?sell? and doesn?t own any.
China Mobile, the world?s biggest phone carrier by market value, on Oct. 20 posted third-quarter net income that rose 3.5 percent to 29.6 billion yuan, missing analysts? estimates.
China Telecom Corp., the nation?s biggest fixed-line carrier and third-largest mobile company, yesterday reported third-quarter profit that beat analyst estimates by rising 27 percent to 3.78 billion yuan.
--Edmond Lococo. Editors: Garry Smith, Terje Langeland
To contact the reporter on this story: Edmond Lococo in Beijing at elococo@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
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