China Unicom, the country’s second-largest wireless network operator, has warned investors that it expects to post an 85 per cent year-on-year drop in net profit for the first quarter amid a rise in operating expenses.
In a filing with the Hong Kong stock exchange after trading closed on Monday, Unicom said the downswing was mainly caused by a 16 per cent year-on-year increase in selling and marketing spending, as well as a 37 per cent year-on-year jump in network, operations and support costs in the quarter to March.
The company estimated its net profit to have reached 480 million yuan (HK$574.54 million) last quarter, which it said was “a significant improvement” from the 4.55 billion yuan loss it recorded in the quarter to December.
Despite that profit warning, Unicom’s total service revenue in the first quarter was estimated at 60.8 billion yuan.
That was buoyed by mobile service revenue of about 36.2 billion yuan and the addition of 6.61 million new mobile subscribers in the first quarter.
In a research note, Bernstein senior analyst Chris Lane said the higher sales and marketing costs and the other increased operating expenses reported by Unicom should come as no surprise to investors.
The company reported last month a sharp decline in both earnings and subscribers for last year even as management, led by chairman and chief executive Wang Xiaochu, pushed forward an aggressive turnaround strategy.
