Bloomberg News

China Unicom Slumps After Profit Misses Analyst Estimates

October 26, 2012

China Unicom (Hong Kong) Ltd. (762), the nation’s second-largest mobile-phone company, dropped the most in more than three years in Hong Kong trading after third- quarter profit missed analysts’ estimates.

Unicom fell 7.6 percent to HK$12.72, its largest decline since April 1, 2009. The stock has lost 22 percent this year while the benchmark Hang Seng Index has gained 17 percent.

Net income rose 27 percent to 2.02 billion yuan ($324 million), compared with the 2.21 billion-yuan median of seven analysts’ estimates in a Bloomberg News survey. Chairman Chang Xiaobing turned to low-cost smartphones priced at 1,000 yuan or less, luring price-conscious users such as students, after losing the advantage as the only Chinese carrier to offer Apple Inc.’s iPhone with a service plan.

“Monthly data usage of its 3G subscribers appears lackluster,” Steven Liu, an analyst at Standard Chartered Bank, said in a report as he cut his recommendation to underperform. The stock “trades at a substantial premium to its domestic peers, which is unjustified given its poor earnings capability,” he wrote.

Revenue rose 16 percent to 63.5 billion yuan in the third quarter, beating the median estimate of 63 billion yuan in the Bloomberg News survey.

Unicom faced “keen market competition” to speed user growth in the period, the company said in yesterday’s statement. As a result, selling and marketing expenses surged 23 percent to 25.4 billion yuan in the first nine months of this year, the company said. Its cost of telecommunications products sold jumped 48 percent to 33.8 billion yuan for the nine months, the company said.

Unicom had 66.9 million 3G subscribers at the end of the third quarter, lagging behind the 75.6 million for market leader China Mobile Ltd. (941), according to data the companies released this month. The smaller operator, which also offers fixed-line broadband Internet services, had a mobile customer base of 229.5 million, or 33 percent of China Mobile’s 698.5 million.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at

To contact the editor responsible for this story: Michael Tighe at

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