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SCMP Reporter

Shares of China Unicom fell 7.08 per cent yesterday after the company announced plans to spend 100 billion yuan (HK$114 billion) to develop  its 3G mobile network on the mainland.
The stock dropped HK$1 to close at HK$13.12 after sinking to as low as HK$12.88 during the day.
Chairman Chang Xiaobing said on Monday the company could roll out its 3G services as early as in the third quarter of next year if the government issued the licence this year.
Some analysts revised down their earnings forecasts on Unicom for the next two years to reflect higher depreciation cost due to the 3G network roll-out.
CLSA yesterday cut its forecasts by 4 per cent and 11 per cent for this year and next year respectively, saying  China Unicom would also face lower average revenue per user (arpu) because of more competition. Citing Unicom's management, CLSA said 70 per cent of the 100 billion yuan capital expenditure would be spent  next year and the rest in 2010.
'The high capital expenditure will increase depreciation expense ... while lower arpu reduces Unicom's 2009 and 2010 earnings each by 10 per cent,' CLSA analyst Francis Cheung wrote in a research report yesterday.
CLSA expected Unicom's profit next year to reach 18.24 billion yuan  after the merger with China Netcom,  10.6 per cent lower than its previous forecast.
Credit Suisse cut Unicom's target price to HK$17 from HK$19 to reflect higher 3G investment.
Nomura International placed  the fair value of Unicom's share price  at HK$14.15. The brokerage firm estimates the stock will trade at 15.4 times 2009 earnings after the merger, higher than China Mobile's 11 times.
'Given the downward pressure on Unicom's mobile business and higher capital expenditure on mobile network ... Netcom's earnings contribution could  account for 55 to 60 per cent of the merged entity in the next two years,' Nomura  analyst Kelvin Ho wrote in a research report.
UBS said Unicom would face competition with China Telecom and China Mobile and its fixed-line business could also come under pressure as users switched to mobile  phones.
The firm maintains a sell rating on Unicom.



Unicom tumbles on plans for 100b yuan 3G network roll-out