China Unicom looks for revenue with dual-mode handsets

China Unicom, China's No 2 mobile operator, will launch dual-mode handsets on Thursday in an effort to boost the revenue it gets from data service, as competition heats up in the world's biggest cellular market.
Unicom, which runs both GSM and CDMA networks, has not upgraded its GSM network to the 2.5 generation, although over 70 percent of its customers are GSM subscribers.
Unicom will sell dual-mode CDMA/GSM handsets made by Motorola, LG Electronics and Samsung for 3,000-4,000 yuan (about US $362-483) each and these will enable users to switch between networks and promote usage of CDMA 1X data service, its chairman said on Saturday.
"Data service is a key competitive edge for us, we aim to increase the number of CDMA 1X users to 10 million this year, up from the current level of 4 million," Wang Jianzhou told a group of reporters in Hong Kong.
China Unicom generated 776 million yuan or 4.5 percent of CDMA revenue from wireless value-added service in 2003. That was 27 percent of the firm's wireles data revenue or just one percent of its total revenue last year.
UBS estimated Unicom's wireless value-added service revenue to increase by 79 percent to 5 billion yuan, or 6 percent of total revenue, in 2004.
But the investment bank also noted that as Beijing forced short messaging service providers to new billing systems in March, that simplified SMS service termination procedure, SMS revenue for leading portals like Netease.com, Sohu.com and Sina had tumbled.
UBS said Unicom could lose 455 million yuan, or 30 percent of its revenue, from SMS subscription fees as result of the billing system change.
That is equal to five percent of its 2004 forecast net profit of 6 billion yuan.
"We have to increase data revenue by other means to make up the loss," said Wang.
The dual-mode handsets will allow users to surf any internet Web site, Wang said. Next month, Unicom will cut the price of CDMA wireless Internet cards to 1,000 yuan each, or one-third of the current price, to promote the wireless internet access service. China Unicom shares slipped 0.86 percent to end at HK$5.85 in Hong Kong on Friday.