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Chinese telco has turned around mobile customer losses, but says sales and marketing costs increased significantly.
China Unicom expects to post a hefty decline in profit for the first half of this year due to rising costs, it warned recently.
The Chinese operator said profit attributable to equity shareholders will fall by around 80% year-on-year in the six months to the end of June, largely on the back of significantly increased sales and marketing costs as the company worked to turn around its declining mobile customer base.
Net mobile customer additions reached 8.39 million in the first half, "successfully turning around the downward trend in mobile subscribers for consecutive months last year," the telco said, in a statement.
China Unicom has posted net adds every month in 2016 so far, having spent much of 2015 watching its subscriber base drop. At the start of last year the telco was losing millions of subscribers per month, although by Q4 its average monthly net losses had improved to just above 300,000.
While the return to customer growth has come at a cost, there are also other reasons for the operator’s predicted profit slump.
Usage fees for the telecoms towers that were subsumed into China Tower – the joint venture created by China’s big three operators late last year – had an impact on 1H costs, as did higher energy and property rental charges, China Unicom said.
Along with its major rivals, the operator brokered a new deal on tower leasing costs last month. Nomura analysts put the cost savings for China Unicom at around 1.9 billion yuan (€256 million) this year, according to local press reports, which should help the telco in 2H.
Also on a positive note, China Unicom pointed out that it will make a profit in the first half of this year, having turned in a CNY3.36 billion loss, excluding gains on the disposal of tower assets, in the second half of last year.
In 1H 2015 its profit attributable to shareholders reached CNY6.99 billion.
China Unicom is due to report 1H 2016 numbers on 17 August.
