UPDATE: China Unicom 2010 Net Profit Down 60% At CNY3.85 Billion

China Unicom (Hong Kong) Ltd. (CHU) said Tuesday its net profit fell 60% last year as it spent heavily on handset subsidies to attract users to its third-generation mobile services.

The results mark the second consecutive year for which China Unicom's net income has more than halved, as the company has invested heavily to get its 3G business off the ground. China Unicom, the country's second-largest mobile operator by subscribers after China Mobile Ltd., has faced growing competition in the mobile area since it sold its code-division-multiple-access mobile business to China Telecom Corp. in 2008 and transformed into a nationwide full-service operator offering fixed-line, broadband and mobile services.

China Unicom is competing with China Telecom and China Mobile to attract users for 3G services, which offer faster data speeds and higher revenue per user.

China Unicom said its net profit for the 12 months ended Dec. 31 fell to CNY3.85 billion (US$586.9 million) from CNY9.56 billion a year earlier. Revenue rose 11% to CNY171.30 billion from CNY153.95 billion. The net profit figure came in slightly above analysts' average forecast of CNY3.83 billion and revenue beat the average CNY168.09 billion forecast in a Dow Jones Newswires poll.

The company warned in January it expected its net profit to have fallen by more than half last year, despite growing revenue, due to rising costs for 3G handset subsidies and high depreciation and amortization fees.

The company set its capital expenditure budget for 2011 at CNY73.8 billion, up slightly from 2010 spending of CNY70.2 billion.

China Unicom's supply of Apple's iPhone 4 handsets is smooth despite the major earthquake in Japan, Chief Executive Chang Xiaobing said at a news briefing. The quake has disrupted supply chains for some device makers.

"Up to now, the supply of iPhone 4 remains smooth despite the Japan earthquake, but it is difficult to predict the long-term impact," Chang said.

Chang also said the company has no timetable yet to offer Apple's iPad tablet computer. Apple already sells the iPad in China, but only versions without third-generation mobile connectivity, and China Unicom doesn't yet offer the devices. Unicom, the sole telecom carrier to offer the iPhone in mainland China, said last year it hopes to offer the iPad as soon as possible.

An Apple spokeswoman declined to comment.

China Unicom will offer services for BlackBerry devices from Research In Motion Ltd. (RIMM) by June this year, company President Lu Yimin said.

China Unicom aims to add at least 35 million mobile users this year, including at least 25 million 3G users, Lu said. The company had 16.7 million 3G users and 154.9 million users of its second-generation mobile services at the end of February. That trails China Mobile's 24.5 million 3G users at the end of February.

China Unicom recommended a final dividend of CNY0.08 a share, down from CNY0.16 a year earlier.

-By Owen Fletcher and Chester Yung, Dow Jones Newswires; 8610 8400 7702; owen.fletcher@dowjones.com

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