China Unicom Rises After Profit Beats Estimates: Hong Kong Mover

China Unicom (Hong Kong) Ltd. (762) rose to the highest in six months after the carrier posted second-quarter profit that beat analysts’ estimates as low-priced smartphones lured new users.

The nation’s second-largest mobile-phone company rose 2.3 percent to close at HK$11.80 in Hong Kong trading, the highest close since Feb. 7. That pared its drop this year to 5 percent.

Net income in the three months through June rose 41 percent to 3.42 billion yuan ($559 million) from 2.42 billion yuan a year earlier, based on figures derived from six-month earnings that the Beijing-based company reported yesterday. That compares with the 3.17 billion-yuan average of eight analysts’ estimates compiled by Bloomberg.

“Total revenues appear higher than our estimate, while service revenues appear in-line, indicating higher-than-expected handset sales,” Anand Ramachandran, a Hong Kong-based analyst at Barclays Plc., wrote in a report to clients yesterday.

Chairman Chang Xiaobing has turned to low-cost smartphones from Chinese suppliers such as Lenovo Group Ltd. (992)’s A66 or ZTE Corp. (763)’s V790, both priced at 499 yuan ($82), to trim subsidy costs and reduce reliance on Apple Inc. (AAPL)’s iPhone to win users. Unicom, which lost exclusivity to offer the iPhone last year to China Telecom Corp., still sells the iPhone 5 for 4,699 yuan on its website, while offering it free with some service plans.

Photographer: Adam Dean/Bloomberg

A person passes a China Unicom (Hong Kong) Ltd. phone booth in Beijing. Close

A person passes a China Unicom (Hong Kong) Ltd. phone booth in Beijing.

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Photographer: Adam Dean/Bloomberg

A person passes a China Unicom (Hong Kong) Ltd. phone booth in Beijing.

Handset Subsidies

The company’s first-half financial results were posted first to the website of the State-owned Assets Supervision and Administration Commission under China’s ruling State Council, or cabinet, shortly after 3 p.m. yesterday, while shares were still trading in Hong Kong.

The SASAC data release caused shares to jump as much as 3.9 percent in Hong Kong before trading was suspended at 3:32 p.m. yesterday ahead of the company’s release through the stock exchange. The official release at 4:17 p.m. yesterday contained the same figures as the earlier release by SASAC.

Revenue rose 22 percent to 73.7 billion yuan in the second quarter, beating the 71.6 billion-yuan average of eight analysts’ estimates compiled by Bloomberg, based on figures derived from the SASAC data.

“China Unicom continues to manage its handset subsidies,” Cynthia Meng, a Hong Kong-based analyst with Jefferies Group LLC, wrote in an Aug. 1 report. Profit margins will expand in the second half as cheaper phones that don’t require carrier subsidies increase in popularity.

Unicom had 100 million 3G subscribers at the end of the second quarter, lagging behind the 138 million for market leader China Mobile Ltd. (941), according to data the companies released last month. The smaller operator had a mobile customer base of 262 million, or 35 percent of China Mobile’s 740 million.

China Mobile is scheduled to report results for the period on Aug. 15.

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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