Qualcomm Inc (QCOM)

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China Unicom's Profit Probably Rose 9%, Poll Shows (Update1)

March 25 (Bloomberg) -- China Unicom Ltd., the smaller of the two mobile-phone operators in the world's largest wireless market, probably boosted 2003 profit by 9 percent after buying provincial networks and clients from its parent to boost sales.

Net income rose to 5 billion yuan ($604 million) from 4.6 billion yuan in 2002, according to the median estimate of seven analysts polled by Bloomberg. Sales probably jumped by 67 percent to 68 billion yuan.

Profit growth slowed from an annual 75 percent in the previous three years after Unicom gave away handsets to add users to its code division multiple access service and took charges on an unprofitable paging unit. Unicom sold the unit to state-owned parent China United Telecommunications Corp. in November in exchange for provincial cellular networks and said it would cut subsidies to help the two-year-old CDMA service post a profit.

``They need to show a big operating profit from CDMA for the fourth quarter to offset losses recorded earlier in the year.'' said Kelvin Ho, an analyst at Nomura International (H.K.) Ltd., who has a ``reduce'' rating on the stock.

Hong Kong-based Unicom posts earnings today after local markets close.

The CDMA service, based on technology developed by Qualcomm Inc., posted a 570 million yuan pretax loss for the first nine months of 2003. Unicom added 10.7 million CDMA customers last year, failing to meet its target for 11.4 million new users amid intensifying price competition with China Mobile (H.K.) Ltd.

21 Provinces

Unicom had 80.8 million customers at the end of 2003 in the 21 provinces it served, or about a third of China's mobile market. The company's users rose to 95 million by the end of February, including subscribers in nine networks Unicom bought from China United Telecommunications in November, giving it almost nationwide coverage.

About 75 million of Unicom's customers use the global system for mobile communications service, based on China's dominant mobile standard. Unicom also sells long-distance and Internet services.

Unicom shares have risen 13 percent this year, outperforming a 0.1 percent gain by the benchmark Hang Seng Index, as investors bet the CDMA service will improve profit this year. The stock fell 1.2 percent to HK$8.20 at 10:34 a.m. in Hong Kong.

Unicom's average revenue per user, a measure of the size of customers' monthly phone bill, probably dropped 18 percent last year to 57 yuan for its older GSM service, Ada Ho, a Bear Stearns & Co. Hong Kong-based analyst, estimates. That's about half of China Mobile's customers, who are all GSM users, and about a 10th of users at NTT DoCoMo Inc., Japan's largest cellular carrier.

Unicom has said it will take a year-end charge of as much as 480 million yuan from the sale of its paging unit to China United Telecommunications. That will add to a one-time loss of 528 million yuan booked in the first half to reflect the falling value of the paging unit. More Chinese people are disconnecting their pagers to switch to mobile phones as prices of cellular service drop.



To contact the reporter on this story: Kenneth Wong in Hong Kong
at [e-mail]

To contact the editor of this story:
Charles Bickers in Tokyo at [e-mail]
Last Updated: March 24, 2004 22:03 EST

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