China Unicom (Hong Kong) has predicted that capital spending this year will soar 30 per cent to 100 billion yuan (HK$123 billion) as it upgrades its mobile and broadband networks, and subsidises handsets.
The mainland's second-largest wireless carrier last year set a target of 25 million new users of its high-speed third-generation network, and attracted 26 million, but declined to detail this year's target.
The Beijing-based company also said its loss-making 3G business would see a turnaround this year.
'The growth in users of smart handsets priced around 1,000 yuan was so good in the fourth quarter that it beat our expectations,' said chairman and chief executive Chang Xiaobing.
China Unicom was formerly the exclusive partner carrier of technology giant Apple's iPhone on the mainland, but its rival China Telecom entered the fray last March offering the iPhone 4S to customers.
'China Telecom's move has had positive effect on us,' said senior vice-president Li Gang. 'Since they joined, our sales volumes have been increasing.'
He said the co-operation with Apple, which dates to 2009, had been satisfying and had 'exceeded both sides' expectations'.
Li Zhiwu, an analyst at Bocom International Securities, said the iPhone boosted the number of high-quality customers, but posed short-term pressures on China Unicom's profit, and the company also faced the challenge of retaining high-end users. 'The quality of their networks in urban areas is good, but it needs to expand its coverage,' Li said.
The company said that it would eliminate blind spots in urban areas and extend coverage to developed townships. 'The coverage in townships will be improved to 78 per cent from 39 per cent this year,' the company said.
Having successfully introduced a series of smartphones priced around 1,000 yuan, the company will launch handsets priced at 700 yuan or less to lure low-end 3G users.
Independent industry analyst Xiang Ligang said the cheaper smartphones were more effective in attracting users than the iPhone. 'The fundamental thing is still to improve networks so the users will have a better experience, and to offer more choice of cheap terminals.'
Average revenue per user is 47.3 yuan, rising 8.2 per cent from 43.7 yuan year on year. Arpu of the more lucrative 3G business was 110 yuan last year, down from 124 yuan a year earlier. 'Generally speaking 3G Arpu is falling slowly because our user pool is getting larger,' Li said.
Net profit rose 14 per cent to 4.23 billion yuan, reflecting high-end customers using more data services. Revenues from 3G increased 1.8 times to 32.7 billion yuan.
The total number of China Unicom subscribers rose 19.3 per cent to 200 million in 2011. The number of 3G users reached 40 million at the end of last year, but the company said the market potential was huge despite the strong growth.
'Smartphone penetration in China is still low, at 13 per cent last year,' Li Zhiwu said.
Big state-owned telecoms carriers on the mainland: Unicom, Telecom and Mobile