Key Takeaways:
China Unicom first-half net profit fell 34.6% to RMB 9.47 billion as VAT and labor costs squeezed margins.
"The profit decline was primarily driven by the value-added tax policy adjustment and changes in the pace of labor cost investment," China Unicom said in its interim results announcement, adding that the full-year profit decline should narrow significantly.
Operating profit dropped 46.8% to RMB 7.4 billion as operating costs rose 4.1% to RMB 193.96 billion, lifting the cost ratio to 96.3% from 93.0%. Employee compensation and benefits climbed 19.3% to RMB 34.14 billion, while a tax reclassification effective Jan. 1 raised the value-added tax rate on mobile data, messaging and broadband services from 6% to 9%.
Shares of the Hong Kong-listed carrier fell as much as 10.7% in early trading to HKD 5.6, with turnover of about 73.24 million shares worth HKD 413 million. The board did not declare an interim dividend — the first suspension since 2021 — compared with RMB 28.41 cents per share a year earlier.
Compute pivot
Compute revenue rose 13% to RMB 41.9 billion, with intelligent computing scale exceeding 45 EFLOPS and resource utilization above 74%. Compute investment accounted for 37% of first-half capital expenditure of RMB 24.08 billion, up more than 80% year over year.
Cash flow holds up
Despite the profit pressure, net operating cash inflow rose 13.6% to RMB 32.94 billion, a multi-year high, with free cash flow of RMB 8.86 billion. The asset-liability ratio stood at 44.4%, with net debt-to-capital of 0.7% and about RMB 211.1 billion in undrawn credit facilities.
Traditional business, emerging growth
Service revenue slipped 0.2% to RMB 177.96 billion as traditional connectivity enters a low-growth phase, while communications product sales rose 7.1% to RMB 23.41 billion. International business revenue grew 14% to RMB 7.7 billion, and the security business served 470,000 customers, up nearly 30%.
The results mark a strategic shift: China Unicom is redirecting capital toward computing infrastructure even as traditional telecom revenue stagnates. Investors will watch whether the compute investment translates into higher revenue and profit in the coming quarters, and whether the board restores a dividend at the full-year results.
This article is for informational purposes only and does not constitute investment advice.
