A man rides a tricycle passing a China Unicom store in Beijing. The telecom service provider expects its 3G business to lift profits this year. Adam Dean / Bloomberg

China Unicom (Hong Kong) Ltd expects its 3G business to turn in a profit this year as the nation's second-largest mobile-phone operator steps up efforts to attract 3G users, Chairman Chang Xiaobing said in Hong Kong on Thursday.

In the first-half of the year, China Unicom's net additions of 3G subscribers stood at 17.51 million, taking its total number of 3G subscribers to 57.53 million. The company's pace of adding 3G subscribers is noticeably faster than that of its major competitor, China Mobile, which recorded net additions of 15.87 million 3G subscribers during the same period.

By the end of June, China Mobile - the world's biggest phone company by subscriber numbers - had 67.1 million 3G subscribers.

Chang said earlier this year China Unicom's 3G business was expected to make a profit within this year. Speaking at the company's interim results press conference, he assured that the company will live up to its promises.

"Our 3G business has already crossed the line (between loss and profit), and there is no doubt that it (3G business) will be profitable this year," he said.

In the first six months of this year, China Unicom's 3G business contributed a revenue of 26.9 billion yuan ($4.23 billion), accounting for 44.5 percent of the company's total mobile-service revenue. The remaining 55.5 percent of its mobile-service revenue was from its 2G business.

Chang believes it won't be very long before China Unicom's 3G business surpasses its 2G operations and become the major contributor to its mobile-service revenue, At present, the 3G penetration rate on the mainland is only 16 percent and the potential for further development is great.

The average revenue per user (ARPU) of China Unicom's 3G user was 91.8 yuan a month during the first-half, having declined significantly by 21.9 percent from 117.5 yuan in the same period a year ago.

China Unicom president Lu Yimin explained that due to the popularity of low-price smart phones, a large part of the company's new 3G subscribers are "low-end" customers, creating some negative impact on its ARPU.

"The ARPU of our 3G subscribers is likely to continue to drop in the second-half, but hopefully with a slower pace," he said.

China Unicom spent 3.515 billion yuan on 3G handset subsidy during the first-half, which accounts for 13.1 percent of its revenue from 3G business, during the same period of 2011. The subsidy accounted for 23.2 percent of its 3G revenue.

Lu said that along with the increasing number of 3G subscribers, the company would spend more on the subsidy in the second-half of this year.

China Unicom's first-half net profit was 3.43 billion yuan - up 31.9 percent from 2.62 billion yuan recorded a year earlier and beats the market consensus.

Macquarie Capital Securities analyst Lisa Soh told Reuters that China Unicom's net profit was "a little bit better" than expected and looks like it has been driven by lower depreciation because the EBITDA level is only in line with expectations.

sophiehe@chinadailyhk.com

(HK Edition 08/24/2012 page2)