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SCMP Reporter

Red chip China Unicom revealed yesterday that it had spent 5.55 billion yuan (about HK$5.19 billion) on handset subsidies to help achieve its 4.49 million CDMA subscriber target.

The mainland's No 2 cellular carrier said its code division multiple access (CDMA) operation lost 988 million yuan last year, although losses in the second half narrowed by 36.1 per cent to 385 million yuan.

China Unicom reported earnings growth of 2.5 per cent, the slowest in four years, to a total of 4.57 billion yuan last year, with CDMA operations one of the major reasons for the slowdown.

The carrier began to operate a new mobile network using the CDMA technology in January last year, along with its existing global system for mobile communication network (GSM).

China Unicom offered aggressive handset subsidies to help boost user growth for the CDMA network.

If the handset subsidies that nine newly acquired provincial networks spent on acquiring CDMA users last year are included, total handset costs for the company's 6.42 million CDMA users last year amounted to 8.11 billion.

Executive vice-president Shi Cuiming said China Unicom still had 5.98 billion yuan of outstanding handset costs carried forward from last year to be amortised for this year.

Based on last year's data, additional handset costs for the current year could amount to another 4.5 billion yuan.

China Unicom aims to sign up 11.4 million new CDMA users and 10.1 million new GSM users this year, across 21 provinces.

DBS Vickers analyst Wallace Cheung said the risks of the CDMA operation still clouded the firm's short-term prospects. But CLSA analyst Francis Cheung said despite handset costs, CDMA users still brought in revenue.

China Unicom executives promised the CDMA operation would break even for the full year.

President Wang Jianzhou said the company would not sacrifice profit to achieve its CDMA target.

Last year, 60 per cent of CDMA users were on handset subsidy plans. The company hoped to reduce it to 20 per cent this year.

'Even if we subtract handset costs, the net [average revenue per user] was 98.3 yuan, which is higher than GSM,' Mr Wang said.

Graphic: unicomgbz



Unicom spends $5.19b on handset subsidies to achieve CDMA target