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China Unicom First-Quarter Profit Gains on Low-Cost Smartphones

China Unicom (Hong Kong) Ltd. (762), the nation’s second-largest mobile-phone company, posted first- quarter profit that rose 89 percent as low-priced smartphones helped control the cost to add new users.

Net income rose to 1.9 billion yuan ($308 million), from 1.01 billion yuan a year earlier, the Beijing-based company said in a filing today. Profit was expected to rise to 2.58 billion yuan, according to the median estimate of four analysts surveyed by Bloomberg News.

Chairman Chang Xiaobing curbed expenses while luring new smartphone subscribers with low-cost devices priced at 999 yuan, including ZTE Corp. (000063)’s V956. That helped win users who download games and videos on third-generation services while reducing its reliance on subsidies for pricier devices such as Apple Inc. (AAPL)’s iPhone5, which sells for about six times the price.

“The 3G business will be the main driver for China Unicom’s earnings” this year, Alen Lin, a Hong Kong-based analyst with BNP Paribas Securities Asia, said in an April 9 report. “The offering of low-cost handsets will keep subsidy expenses under check, boosting profitability.”

Revenue rose 15 percent to 70.6 billion yuan in the quarter, from 61.2 billion yuan. The company was expected to report sales of 66.7 billion, according to the median estimate in the Bloomberg survey.

Unicom fell 0.2 percent to close at HK$10.80 in Hong Kong trading before the announcement. The shares have dropped 13 percent this year, compared with a 1.1 percent decline for the city’s Hang Seng Index.

Unicom had 87.8 million 3G subscribers at the end of the first quarter, lagging behind the 114.4 million for market leader China Mobile Ltd. (941), according to data the companies released this month.

China Mobile this week reported its weakest profit growth in three quarters as higher costs eroded gains from an increase in users of high-speed network services. Third-ranked China Telecom Corp. (728) is scheduled to report results tomorrow.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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