Unicom confident of CDMA liquidity by year end

1 Sep 2003

China’s second largest mobile operator China Unicom [NYSE: CHU] has said it expects its CDMA division to break even in the second half of 2003, despite recording a loss of CNY587 million in the first six months of the year. The unit, which registered a loss of CNY600 million in the year ago period, also said it was confident of reaching its year-end CDMA subscriber target of 11.4 million, having increased numbers by 3.7 million to 9.98 million in the first half.

Unicom, which also boasts around 40 million GSM subscribers, recently launched pre-paid services for its CDMA users. Whilst the new payment option may help the operator reach its subscriber targets, it is aimed at low-end users and is therefore bound to impact on Unicom’s already falling ARPU rates which decreased from CNY95 to CNY84 between December 2002 and June 2003. However, of more concern for the analyst community is the operator’s continued practice of capitalising the cost of handset subsidies, rather than filing them against profits. In the first half of 2003 Unicom amortised CNY3.1 billion of its costs in this way, despite only a few months ago saying that it planned to stop the practice.