China Unicom Quarterly Profit Doubles on Accounting Change
China Unicom (Hong Kong) Ltd., the nation’s second-largest mobile phone company, posted fourth- quarter profit that more than doubled as the company changed the way it accounts for handset subsidies.
Net income rose to 583 million yuan ($89 million), from 218 million yuan a year earlier, according to figures derived from 12-month earnings the Beijing-based company reported today. Profit exceeded the 339 million yuan median of four analysts’ estimates in a Bloomberg News survey.
Unicom, the only carrier in China now offering Apple Inc. (AAPL)’s iPhone with a contract for 3G high-speed network service, saw subsidies rise in the fourth quarter after the introduction of the iPhone 4, Chief Financial Officer Tong Jilu said at a briefing today. Total handset subsidies were 6.9 billion yuan last year, he said. That exceeded the 5 billion yuan the company had forecast in May.
The carrier said it began adopting a so-called “relative fair value method” of accounting for subsidies, which helped boost second-half sales by 527 million yuan and profit by 396 million yuan, without breaking down the fourth quarter. The changes are retroactive to Jan. 1, 2010.
Revenue rose 18 percent to 46.2 billion yuan in the fourth quarter, beating the median estimate of 43.8 billion yuan in the Bloomberg News survey.
3G Additions
Unicom rose 0.2 percent to close at HK$13.10 in Hong Kong trading before the announcement. The shares have gained 18 percent this year.
China Unicom forecast it will add 25 million 3G subscribers this year after ending up with 14.1 million at the end of December. The company plans to begin offering Research In Motion Ltd.’s BlackBerry in the first half, President Lu Yimin said.
Chairman Chang Xiaobing has yet to turn his advantage with popular Apple handsets into a leading market position as the company continues to trail larger rival China Mobile Ltd. (941) in both 3G and total subscribers.
Unicom, which started offering its 3G services in October 2009, had planned to spend between 3 billion yuan and 5 billion yuan on handset subsidies last year, to attract higher-end customers who could lift revenue from non-voice services such as music and video downloads, Lu said in May.
Handset Subsidies
The carrier was projected to spend 5.2 billion yuan on handset subsidies for the full year in 2010, according to the median estimate of three analysts in a survey by Bloomberg News. The company in October said it had spent 2.99 billion yuan on handset subsidies in the first nine months of the year.
Fourth-quarter subsidies were estimated at 3 billion yuan, out of the full-year total of 5.5 billion yuan, by Alan Hellawell, a Hong Kong-based analyst at Deutsche Bank AG.
China Mobile, the world’s biggest phone carrier by users, on March 16 posted fourth-quarter profit that increased 3.7 percent to 32.4 billion yuan. Sales rose 6 percent to 132.6 billion yuan.
China Telecom Corp., the country’s biggest fixed-line carrier and third-largest mobile phone company, on March 22 said fourth-quarter profit rose 42 percent to 2.67 billion yuan. Sales rose 5.1 percent to 56.2 billion yuan.
China Telecom said it more than tripled the number of users for its third-generation service to 12.3 million as of the end of December. It had a total of 90.5 million mobile subscribers at the end of last year.
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
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