China Unicom (Hong Kong) Ltd, the country's second largest mobile operator, saw its first-half net profit down by 62 percent year-on-year to 2.53 billion yuan mainly as a result of the huge costs the 3G network development and operation incurred.

Revenue for the first half ended June totaled at 82.11 billion yuan, representing a 7.6 percent growth year-on-year. The first-half operating expenses rose by 15.8 percent to 78.4 billion yuan from a year earlier.

"The company's 3G business is still in its infancy. The revenue brought about by the 3G business is still unable to cover the costs from its development and operation," said the company's chairman Chang Xiaobing.

Equipment depreciation was the largest contributor of the company's operating expenses, accounting for 32.4 percent of the total.

"The 3G assets started to depreciate in the fourth quarter last year, which translated to the increase of the company's depreciation cost," the company's CFO Tong Jilu said at a press briefing on the interim results.

Capital expenditure for 2010 will hit 73.5 billion yuan, of which 23 billion yuan will be appropriated for the development and marketing of the 3G network.

"Although there has been a considerable increase of costs, we still consider the investment in developing the 3G, GSM and broadband network and services necessary and worthwhile," said Chang.

The first half saw the company's 3G and GSM subscribers increase by 4.82 million and 4.56 million respectively. 3G service revenue surged to 3.98 billion yuan from 769 million yuan a year ago, accounting for 5 percent of the company's total telecommunications service revenue.

"3G business has largely explained the growth of our mobile business in the first half of 2010," said the company's president Lu Yiming.

Mobile business grew by 17.7 percent to 41.05 billion yuan from a year earlier, to which the 3G business contributed 5.92 billion yuan.

The fixed-line business continued to drop in the first half, but its fixed-line broadband business stood out with year-on-year growth of 23.4 percent.

"The fixed-line business continued to decline, but we saw a slowdown in the pace of decline in the first half of this year," said the chairman.

Looking ahead, China Unicom is going to push ahead with the construction of its 3G network and improvement of the GSM network. The company will also launch new services such as application store to further enrich the 3G service applications.

China Daily

(HK Edition 08/27/2010 page3)