UPDATE 1-China Unicom Q2 net slips, but matches forecasts

Thu Aug 23, 2012 4:55am EDT

(Adds details, quotes)

By Lee Chyen Yee and Alison Leung

HONG KONG Aug 23 (Reuters) - China Unicom (Hong Kong) Ltd , the country's second-biggest mobile phone operator, posted a 2 percent fall in quarterly net profit, largely in line with market forecasts, as handset subsidies weigh on its bottomline.

China Unicom's first-half net profit totalled 3.43 billion yuan ($540 million), up from a revised 2.62 billion yuan a year earlier and compared with a consensus forecast of 3.3 billion yuan by six analysts surveyed by Reuters.

That meant that China Unicom made a net profit of 2.42 billion yuan in the April-June quarter, down from 2.47 billion in the year-earlier period and compared with a forecast of 2.3 billion yuan. Reuters calculated the quarterly profit from the company data.

Lisa Soh, an analyst at Macquarie Capital Securities, said of the first-half figures: "The bottom line was a little bit better than expected and looks like that has been driven by lower depreciation because the EBITDA level is in line with expected."

China Unicom released the results after the close of Hong Kong stock market trading. Its shares rose 4 percent on the day.

China Unicom produced first-half earnings before interest, tax and depreciation and amortisation of just over 36 billion yuan.

China Unicom's results come days after its rivals China Mobile and China Telecom announced first-half earnings.

China Mobile posted flat second-quarter net profit of 34.4 billion yuan, while China Telecom's net profit fell 10 percent, its biggest decline in two years due to higher handset subsidies after bringing in iPhones.

China has over a billion mobile phone users, though less than a fifth are 3G users, which the companies court for higher revenues stream. Most subscribers use 2G to make calls and send text messages.

Chinese carriers have embarked on a price war in terms of offering generous subsidies for handsets to attract more 3G users and offering budget calling schemes. Free mobile messaging, such as Tencent's Weixin, is also starting to weigh on bottomlines.

China Unicom and China Telecom's additions of 3G users rose more than 5 percent in July from a month earlier, faster than China Mobile's near 3 percent, data from the carriers showed.

Out of the three operators, China Telecom, the smallest, has the highest percentage of 3G users, though its profitability was affected by higher handset subsidies given out after it signed a contract earlier this year with Apple Inc to carry iPhones.

All three carriers have been trying to attract higher end 3G users who typically use smartphones to download games and files, which will help boost data usage, which is more lucrative that voice services.

(Reporting by Lee Chyen Yee and Alison Leung; Editing by Neil Fullick)

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