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Nikkei Markets

China Unicom 1H profit jumps 16% on cost controls

China Unicom's mobile services revenue shrank 6.6% to 78.7 billion yuan in the quarter. (Photo by Takaki Kashiwabara)

HONG KONG (Nikkei Markets) -- China Unicom reported a more than 16% rise in profit in the first half of this year on the back of cost controls that helped the state-owned telecom operator blunt the impact of rising competition and falling tariffs.

Net profit for the six months ended June stood at 6.88 billion yuan ($963.2 million), compared with 5.91 billion yuan a year ago, the company said in an exchange filing on Wednesday. The company also declined to pay an interim dividend for this year, citing its profitability, debt obligation, cash flow levels and capital requirement for future development.

Total costs fell 3.6% during the quarter, amidst falling network expenses and interconnection charges.

Revenue fell 2.8% to 144.95 billion yuan, as the company, along with rivals China Mobile and China Telecom, responded to the government's call to reduce tariffs, while enhancing speed. The revenues and profits of most Chinese telecom operators have also been under pressure over the past few quarters because of a saturating market for fourth-generation internet services users.

China Unicom's mobile services revenue shrank 6.6% to 78.7 billion yuan in the quarter. The company said it will create a premium network spanning fourth generation and fifth generation high-speed Internet airwaves to improve its coverage and drive a "steady-to-rising" mobile service revenue in the second half of this year.

China Unicom was among four Chinese companies that were in June given the go ahead for the commercial deployment of 5G services in the country, months ahead of expectations. The 5G networks are expected to bring internet speeds up to 100 times faster than those on fourth-generation networks.

Last month, the company said it will launch 5G trials in 40 cities, including in Shanghai. On Wednesday, the company said it will conduct "paced and precise" investment in 5G construction, with due regards to technological advancement, market demand and business requirements.

Last week, China Mobile, the world's largest mobile services provider, reported a 15% drop in profit in first six months of the year due to stiff competition and tariff cuts, and said it is pursuing new growth drivers to circumvent the pressure on its traditional revenue streams.

China Mobile is also aiming for a faster rollout of 5G services while attempting to contain costs by sharing resources and technology used in its 4G business.

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