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China Unicom H1 2011 Profit Down 6% YoY

Hong Kong Exchanges, 8/24/11

China Unicom (NYSE: CHU; 0762.HK; 600050.SH) has released its unaudited, condensed and consolidated results for the six months ended June 30, 2011. Revenue reached RMB 101.39 bln, up 22.9% YoY.

Net income for the period fell 5.5% YoY to RMB 2.64 bln.

Revenue from telecommunications services was RMB 90.35 bln, up 13% YoY.

Revenue from the mobile business rose RMB 60 bln, up 44.3% YoY, with telecommunications service revenue from the mobile business up 25.3% YoY to reach RMB 49 bln. Value-added service revenue from the mobile business was 17.31 bln, increasing from 31.3% of total telecommunications service revenue from the mobile business in H1 2010 to 35.3%. Telecommunications service revenue from GSM business was RMB 35.82 bln, up 1.9% YoY. Telecommunications service revenue from the 3G business was RMB 13.18 bln.

Total mobile subscribers rose 15.7% YoY to 181.61 mln in H1 2011. Overall mobile monthly average revenue per user (ARPU) was RMB 46.8, up 9.3% YoY. Monthly average minutes of usage (MOU) per subscriber rose 10% to reach 298.3 minutes. Total mobile data traffic rose 489.1% YoY to 37.11 bln MB.

The number of 3G mobile subscribers grew 21.8% YoY to reach 23.95 mln, of which 2.57 mln were wireless data card subscribers. The number of 3G subscribers acquired through third-party channels reached 51%. The proportion of contracted 3G subscribers rose from 15.7% at the end of 2010 to 24.1% as of the end of June 2011. Total 3G voice usage reached 66.22 bln minutes and total 3G data traffic rose 602.2% YoY to 29.78 bln MB, while average data usage per subscriber per month was 265.6 MB, and monthly ARPU rose 9.3% YoY to RMB 117.5. The number of mobile TV subscribers was 8.51 mln, while the number of mobile literature users was 7.93 mln and the number of mobile e-mail users was 17.53 mln.

As of August 15, total sales of China Unicom's first RMB 1,000 3G smartphone, the V880 from Chinese telecom equipment and terminal manufacturer ZTE (0763.HK; 000063.SZ), exceeded 350,000 units, with more than 260,000 contracted subscribers acquired.

The number of GSM subscribers grew by 4.3 mln in H1 2011 to 157.67 mln. Total GSM voice usage amounted to 242.48 bln minutes, up 5.5% YoY. Total GSM data traffic rose 256.2% YoY to 7.33 bln MB. Monthly ARPU fell 3.8% YoY to RMB 38.3. The number of mobile internet subscribers grew by 6.36 mln in H1 2011 to 62.17 mln, representing a penetration rate of 39.4%. The number of "Cool Ringtone" subscribers amounted to 63.38 mln, representing a penetration rate of 40.2%.

As of June 30, 2011, the total number of 3G base stations was 203,000, up 32.8% YoY. China Unicom's HSPA+ network covered 56 key cities nationwide and can provide network services with a downlink rate of 21 Mbps. The total number of GSM base stations rose 13.7% YoY to 248,000.

Revenue from the fixed-line business rose 2.4% YoY to RMB 40.94 bln, of which, service revenue from the fixed-line business grew 2.5% YoY to reach RMB 40.9 bln. Non-voice revenue from the fixed-line business was RMB 25.55 bln and accounted for 62.5% of total telecommunications service revenue from the fixed-line business, as compared to 54% in H1 2010. Out of non-voice revenue from the fixed-line business, telecommunications service revenue from broadband services rose 18.7% YoY to RMB 17.17 bln. Service revenue from the local telephone business fell 15% YoY to RMB 17.66 bln.

The number of fixed-line local access subscribers fell 1.18 mln in H1 2011 to 95.46 mln, of which the number of PHS subscribers dropped by 2.95 mln to 10.47 mln. Monthly ARPU of fixed-line local access subscribers fell 10.8% YoY to RMB 26.4.

The number of fixed-line broadband subscribers grew 19.6% YoY to 52.32 mln. Subscribers with 4 Mbps and higher connections accounted for 35% of all broadband subscribers, up 10.2 percentage points compared to H1 2010. The number of broadband content and application subscribers reached 19.4 mln, accounting for 37.1% of all broadband subscribers. Monthly ARPU fell 1.5% YoY to RMB 57.6. The number of "Wo Family" subscribers increased by 3.31 mln to 3.7 mln, helping to bring in 1.41 mln new broadband subscribers and 1 mln new local fixed-line subscribers.

The total number of broadband access ports rose 26.9% YoY to 7,425 in H1 2011.

Total costs and expenses in H1 2011 rose 24.2% YoY to RMB 97.89 bln. Due to the expansion of China Unicom's network capacity and increase of network assets, as well as the increase in utilities charges and rental expenses, depreciation and amortization charges rose RMB 1.71 bln or 6.4% YoY to RMB 28.35 bln. Networks, operations, and support expenses rose RMB 1.28 bln or 10% YoY to RMB 14.03 bln. Selling and marketing expenses rose RMB 2.26 bln or 19.9% YoY to RMB 13.6 bln. Cost of telecommunications products sold was RMB 14.29 bln. Loss on the sale of telecommunications products was RMB 3.26 bln, of which, loss on sale of 3G handsets ("3G handset subsidy cost") was RMB 3.06 bln, up RMB 2.57 bln compared to H1 2010.

To view China Unicom's full interim earnings report, please click here, and to see the corresponding PDF presentation, please click here.

Keywords: WVAS WCDMA ZTE V880 sales volume China Unicom ARPU fixed-line subsidy handset smartphone mobile data mobile literature broadband penetration profit revenue ringtone telecom users wireless data card mobile subscribers 3G broadband subscribers fixed-line subscribers GSM HSPA mobile e-mail PHS subscribers 0762.HK 600050.SH CHU mobile Internet H1 2011 network construction 3.5G fiscal report mobile phone TV


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