HONG KONG: China Unicom Ltd, the smaller of the mainland's two cellular operators, maintained robust growth in the first half of the year despite fierce competition from bigger rival China Mobile.

China Unicom, the lower-cost wireless provider, earned 2.8 billion yuan (US$351.3 million) in the six months ended June, up 20 per cent year-on-year.

Comparatively, China Mobile's revenue jumped 25.5 per cent. The net profit of the world's largest mobile operator by users and market value reached 30.2 billion yuan (US$3.8 billion), compared to last year's 24.04 billion yuan (US$3 billion).

China Unicom's expansion was "rather laid-back" in the first half, which saw some 80 per cent of new users choosing China Mobile services in the period, Marvin Lo, an analyst with BNP Paribas, said in a research note.

By the end of July, China Unicom had 136.15 million users 101.37 million using its GSM (global system for mobile communications) services and the rest using CDMA (code division multiple access) far from China Mobile's 430 million users.

And its earnings growth in the second quarter was 11 per cent, showing a significant slowdown.

The situation could stoke long-time speculation that the mainland would split China Unicom to merge with other telecom giants in a wider reshuffle of the sector to ease "duplicative construction" and lower costs building a third-generation (3G) network.

But China Unicom denied the reports yesterday and vowed to fight back in rural markets.

"We will intensify efforts to build a rural information highway," said Chairman Chang Xiaobing, adding the company's trial information highway project in Southwest China's Sichuan Province has been successfully completed.

Competition is now shifting to China's rural areas, where the popularity of mobile phones is still low but has great potential.

Both operators are using every possible means to attract more subscribers.

User uptake is still the major revenue generator for the two mobile operators before earnings growth potentially slows down to single digits in 2008, analysts said.

China Unicom also said it is waiting for the first batch of 3G licences on the mainland, which many say could be released early next year after delays.

China Unicom has just received a licence to build a mobile network in Macao based on 3G technology.

The firm is expected to invest 48 million Macao patacas (US$6 million) by the end of this year to upgrade its current 2G CDMA network in Macao to the 3G network based on the CDMA2000 1x standard.

"We hope to get the licence from Macao to operate the 3G business in October," President Shang Bing said.

China Unicom's Hong Kong-traded shares climbed 10.3 per cent in the first half, lagging behind China Mobile's 21 per cent gain but beating a 9.4 per cent rally by the broader Hang Seng Index.

Source: China Daily