China Unicom, the People’s Republic’s second largest wireless operator behind China Mobile Hong Kong (CMHK), predicts it will meet its year end target of having 13 million customers using its CDMA network. Analysts predict, however, that the goal will only be attainable if the company pursues a strategy of offering heavily discounted handsets and generous tariff packages.
Originally formed to break down China Telecom’s monopoly in the fixed line sector in 1994, China Unicom now derives the bulk of its business from cellular services and was the first operator in the country to launch GSM services. However, it lags some way behind CMHK in terms of market share, with 38.62 million GSM subscribers at the end of 2002 compared with its rival’s 117.68 million. Determined to make an impression on the market, in January 2002 Unicom launched CDMA services, investing CNY20.9 billion (USD2.5 billion) in the initial phase of network rollout. The service got off to a slower start than Unicom had predicted but take-up gathered speed in mid-2002 and by the end of the year CDMA users numbered 4.49 million. 2003 got off to a less than promising start, however, with Unicom reporting CDMA subscriber growth of just 6.7% in February, down from 13.4% the previous month and a peak of 35% in September 2002, to take the total to 7.49 million. Despite the slowdown, which was largely attributable to the ending of significant handset subsidies and other incentives for new customers, Unicom has not revised its subscriber targets, predicting that it will reach 13 million CDMA customers by the end of 2003 rising to 50 million two years later.
Unicom plans to begin offering pre-paid CDMA services on a trial basis in April 2003, although this decision has been criticised as a move downmarket. When Unicom launched CDMA the product was designed to attract high-end customers, particularly those it could poach from CMHK, but the company now appears to be sacrificing ARPU for the sake of subscriber growth. Trials will commence in Beijing, Shanghai, Guangdong and Chongqing, as well as in the province of Heilongjiang, although Unicom plans to expand to other areas after around six weeks. Unicom has confirmed that it will not attempt to entice pre-paid users with handset subsidies as it did contract customers, a factor which will cut its subscriber acquisition costs. In late March 2003 the firm completed the rollout of its cdma2000 1X network and launched commercial services under the brand name U-Max. In addition, it is in the process of testing GSM 1X technology, developed by Qualcomm, which will enable GSM subscribers to use its cdma2000 1X high speed data services via a dual-mode handset. In the same month Unicom signed a USD6 million joint venture agreement with South Korean cellco SK Telecom, designed to provide wireless internet services in China; Unicom holds 51% of the new venture.