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China Unicom posts flat growth in net profit in Q4 as costs soar
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China Unicom, the country’s second-biggest mobile carrier by subscribers, yesterday reported flat net profit rise in the fourth quarter compared with the year before, ending a nearly three-year run of accelerating growth as sales and marketing costs soared.
The company’s net profit barely rose to 2.04 billion yuan (US$333.07 million) for the October-December quarter from 2.02 billion yuan the previous year, missing estimates of 2.43 billion yuan based on calculations from a Thomson Reuters SmartEstimate poll of 32 analysts.
Sales and marketing expenses rose 22.7 percent from 2012 to 42.3 billion yuan.
An aggressive push to roll out 4G services by rival China Mobile, the world’s biggest carrier which signed a deal in December with Apple Inc to distribute its iPhone, has forced China Unicom to spend heavily on marketing and invest in 4G in the world’s biggest smartphone market in order to remain competitive.
China Unicom now hopes the government will release licenses for the 4G FDD-LTE standard the company will mainly use for its 4G network, Chairman and Chief Executive Chang Xiaobing said in Hong Kong yesterday.
This will allow the company to compete more strongly with China Mobile, whose network is built on the 4G TD-LTE standard, which the government issued licenses for in December.
The growing ubiquity of smartphones in China, with 500 million mobile Internet users as of December, is threatening revenues for China’s carriers as “over the top” mobile messaging applications like Tencent Holdings Ltd’s WeChat, known as Weixin in China, replace lucrative SMS messaging.
China Unicom said capital expenditure for this year won’t be more than the 80 billion yuan the company had originally planned for 2013, said Lu Yimin, executive director and president of the company. Last year’s capital expenditure ultimately totaled 73.46 billion yuan.
Smartphone subsidies will be little changed in 2014 from last year, Lu said. These subsidies are used to entice customers and weigh heavily on the revenues of all three of China’s carriers.
China Unicom’s revenue for the fourth quarter was 74.9 billion yuan, according to Reuters calculations, up 17.1 percent on the previous year.
China Unicom’s average revenue per user, a closely watched industry barometer, continued to fall for more lucrative 3G subscribers, who account for almost half of the its 284 million subscribers.
ARPU for 3G fell to 75.1 yuan for 2013 from 86.1 yuan a year earlier. ARPU for all subscribers was 48.2 yuan.
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