China Unicom

Unicom focuses on CDMA profit

PUBLISHED : Tuesday, 30 August, 2005, 12:00am
UPDATED : Tuesday, 30 August, 2005, 12:00am

Carrier is prepared to see slower growth in subscribers at lower acquisition costs

China Unicom said it would rather see slower growth in subscriber numbers for its CDMA (code division multiple access) business than lure new customers with expensive subsidies.

William Lo Wing-yan, vice-president of the Hong Kong-listed arm of China's No2 mobile operator, said China Unicom had switched its focus to profitability, from a strategy of investing in the CDMA network and its customer base.

'We need to reach a profitable bottom line soon,' Mr Lo said in an interview with the South China Morning Post. 'This might mean sacrificing our CDMA subscriber additions ... but our new management has been very determined in this since they took over.'

Chairman and chief executive Chang Xiaobing was appointed head of China Unicom at the end of last year, in a move from the mainland's fixed-line operator China Telecom.

'Previously, high CDMA handset prices have obstructed the business,' said Mr Lo, referring to the 1.75 million handsets procured by the company in the first half. 'But we are now removing this obstruction by introducing low-cost handsets below 1,000 yuan.'

High subscriber acquisition costs dragged China Unicom's CDMA business into a half-year loss of 458 million yuan after it amortised for 3.12 billion yuan on handset subsidies.

Last month, China Unicom added 401,000 CDMA customers, bringing the total to 31.32 million. The only dual-network operator in China, it had 90.47 million GSM (global system for mobiles) subscribers as at June. For most of last year, monthly CDMA additions averaged more than 700,000.

Mr Lo said he believed monthly net additions from this month to December would 'not drop too much from July's figure', and that China Unicom's CDMA business would improve in the second half to achieve break-even by end of this year.

For the first half, China Unicom's handset subsidies per subscriber decreased to 367 yuan from 456 yuan last year.