China Unicom profits to fall by more than half

China Unicom has announced that its full year profits for 2010 are likely to be less than half what the company reported for 2009. The news came days after it was revealed that the Chinese carrier is to deepen its equity relationship with Telefónica, with the Spanish incumbent investing €500m to take its stake in Unicom to 9.7 per cent.

Unicom, which made a reciprocal investment in Telefónica, takings its holding to 1.35 per cent, said that handset subsidies and network depreciation were among the reasons for the dramatic downturn in income.

“Although the revenue of the company had grown rapidly in 2010, there is high pressure on the company’s earning in 2010 due to the fast increase of depreciation and amortisation, networks, operations and support expenses, as well as selling expenses, particularly the 3G handset subsidy, in relation to the initial operation stage of the company’s 3G business,” Unicom said in a statement.

The firm’s relationship with Telefónica is intended in part to help assuage the kind of costs that Unicom blamed for its 2010 downturn. The two carriers invested $1bn in one another’s stock in September 2009, pledging to co-operate in a number of areas, including infrastructure and handset procurement, wireless service platform development, enterprise solutions for large multinationals, general R&D, roaming, some unspecified strategic initiatives and an exchange programme for employees.

China Unicom is the second-placed operator in the world’s largest market. Figures from Informa’s WCIS show that it ended 2010 with a subscriber base just short of 168 million. China Mobile leads the market, with 587.3 million, with China Telecom a distant third with 91 million subscribers.