China Unicom says its first-half profit rose about 18 percent from a year earlier after buying networks from its parent.

But the company said a price war was eroding its earnings.

Net income was 2.81 billion yuan (US$340 million). Sales rose to nearly 40 billion yuan from about 32 billion yuan.

Profit for the second quarter, calculated by subtracting the first-quarter result from the first-half figures, jumped 27 percent to 1.4 billion yuan.

Earnings benefited from China Unicom's decision to buy networks in China's poorer provinces from its parent, China United Telecommunications Group.

But the company says profit earned from each of Unicom's subscribers of either CDMA or GSM service, was falling and that the government will step in to stop a price war with its larger rival, China Mobile.

China Mobile, which only offers GSM service, controls about two-thirds of the nation's cell-phone market, leaving Unicom with most of the rest.

(CRI August 27, 2004)