Doing Business in China

China Unicom plans to develop new services for younger instead of CDMA

Unicom'says it plans to develop new data services for younger consumer groups such as college students, in addition to its target high-end business customers.

"We are very attached to younger consumer groups because cases in other countries show that young consumers are a high growing CDMA customer base, in addition to corporate users," Unicom chairman and CEO Yang Xianzu said.

Additionally, Unicom has also moderated its attitude on the introduction of prepaid services, saying that both the network and billing system are fully configured for prepaid and the company will launch the service at "an appropriate time".

Unicom had said that it would not launch prepaid to attract the mass market segment, fearing that it would bring direct conflicts to its GSM business, whose new subscribers are now mostly coming from the prepaid sector.

Joe Locke, regional head of ABN AMRO's Asian telecoms research division, says Unicom's planned launch of a prepaid service would not threaten the company's GSM business, but would provide the carrier with a great deal of flexibility to snare new customers from the growing prepaid sector.

Moreover, its move into younger consumer groups also gives the carrier "a potential excuse to cut price" he adds.

"Youth could mean anything and give them [Unicom] more latitude without committing themselves publicly," says Locke. "It's youth so any promotions could be targeted and lifted without the potential stigma of down market."

Handset subsidies

Unicom started a series of so-called promotional incentive offers in April, including handset subsidies, to accelerate the adoption although it still does not offer discounts as allowed by the government.

Due to the handset promotions, Unicom has seen a rapid pick up in CDMA growth over the past few months, with its subscriber base doubling to 2.3 million from June to the end of August.

But the company paid a price for that. It reported a loss of 603 million yuan ($72.8 million) in CDMA business for the first six months since it launched the service in January. The company said it cost 54.96 yuan a month in handset subsidy for each new CDMA user, reducing the average revenue per user to l00.8 yuan.

Though Unicom had said it would pull back direct handset subsidizes in the second half of this year, the carrier clinched a deal with domestic mobile handset marker Eastern Communications to sell CDMA handsets below the market price soon after it announced its first half-year financial results. Such a move indicated that the company would continue subsidies indirectly as it attempts to meet a self-imposed 7 million year-end subscriber target, analysts said.

China Unicom plans to develop new services for younger instead of CDMA