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Unicom Predicts Higher Profit
China's second largest wireless phone operator China Unicom said Thursday that its half-year profit could increase by about 193.34 million yuan (US$23.35 million). This is due to lower charges for leased lines and other changes to mainland telecom tariffs.
The company said in a statement issued by the Hong Kong stock exchange that it expected fee cuts for long distance calls and Internet services and the elimination of mobile surcharges to reduce its half year income by 76.66 million yuan (US$9.26 million).
But China Unicom said the drop would be more than offset by savings of 270 million yuan (US$34.62 million) from lower leased line costs, resulting in a net increase of 193.34 million yuan. It added that its forecast was based on service volume figures for the six months from June through November.
The statement comes a day after top mainland wireless provider China Mobile (Hong Kong) announced that the tariff changes would cut its half year pre-tax profit by 942 million yuan (US$120.77 million).
In China Mobile's case, the elimination of 0.10 yuan-per-minute mobile surcharges in four key provinces more than offset the savings it expected from lower leased line costs.
The Ministry of Information Industry (MII) announced on Monday it would eliminate all telecom surcharges and would slash fees for long-distance calls, Internet access and leased lines by more than half from January 1.
The move was seen as aimed at luring more people online, calming popular anger at exorbitant phone bills and rationalizing China's telecom rate structure ahead of entry into the World Trade Organization.
"It's a fairly sensible rebalancing of the tariff structure," said Merrill Lynch telecom analyst Alistair Scott. "The only surprise was that they took the opportunity to eliminate the surcharges, which was a useful tidying-up exercise."
The tariff reductions would be offset in the longer term by increased demand from subscribers, he said.
Analysts on Wednesday said China Unicom faced some downside risk on its paging revenues, which would face competitive pressure due to rule changes that allow paging firms to set their own rates.
But China Unicom said the changes that would allow market pricing of paging and Internet Protocol telephony would make it more competitive.
"The company can further increase its competitiveness as it has more discretion in formulating its pricing policies," said the statement.
China Unicom said its profit increase forecast had not taken into account possible subscriber and usage growth spurred by the fee adjustments.
"The board believes that such adjustments will also enhance the increase in usage and the rapid growth of the Chinese telecommunications market," it said.
China Unicom also said it would carry out a trial of leasing services on its optical fibre network in China, which has a total length of 120,000 kilometres.
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