China Unicom sees profit surge

Burgeoning 3G business pushes net income to 1.9b yuan in first quarter

China Unicom (Hong Kong) Ltd, the nation's second-largest telecom operator by subscriber, saw net profits surge 89 percent year-on-year to 1.9 billion yuan ($307.7 million) in the first quarter, thanks to the company's burgeoning third-generation, or 3G, network business.

In a filing to the Hong Kong Stock Exchange on Thursday, China Unicom said revenues rose 15 percent to 70.6 billion yuan in the three months.

The performance means Unicom has managed to narrow the profits gap between it and major domestic rival China Mobile Ltd.

The latter this week posted its weakest profit growth in three quarters as higher costs eroded gains from an increase in its 3G service users.

China Mobile's net profit edged up just 0.3 percent to 27.9 billion yuan in the first quarter.

Analysts attributed China Unicom's rapid growth to its rising 3G service business.

The company has relied on an improved smartphone portfolio and attractive service plans to draw subscribers to its 3G network.

China Unicom became the first Chinese telecom carrier to introduce Apple Inc's iPhone series on contract three years ago, and has now greatly expanded its smartphone offerings.

Its smartphone prices start at around 1,000 yuan, and it offers various options, up to high-end flagship handsets such as Samsung Electronics' Galaxy S4.

"We have seen accelerated 3G business growth from the beginning of this year," said Zhou Youmeng, China Unicom's marketing general manager.

Zhou said that in the first quarter, China Unicom added 11.4 million 3G subscribers, pushing the total number to 87.8 million.

However, the figure still lags the 114.4 million enjoyed by market leader China Mobile.

Zhou said she expected to sell 144 million smartphones on China Unicom's 3G network this year, a year-on-year rise of 35 percent from 107 million in 2012.

Some market analysts have expressed concern over China Unicom's competitiveness over the next one to two years, as China Mobile continues to promote the launch of a TD-LTE 4G network in the country.

China Mobile fell behind its rival in the 3G market, largely due to an inferior 3G telecommunication standard it had adopted.

China Mobile has gained less industry support than China Unicom, as the latter enjoys a more mature WCDMA 3G technology.

"I don't think China Unicom has much to worry about. The company still holds certain advantages in the 4G era," said Chen Peng, a telecom analyst with China Merchants Securities.

"China Unicom is likely to upgrade its 3G network download speed to 42 Mbps next year.

"If the carrier deploys the 4G network, it is going to choose FDD LTE technology," Chen said, pointing out that FDD LTE already enjoys greater popularity overseas, and is better developed than homegrown TD-LTE technology.