Unicom building success on 3G base

This could be a golden year for China Unicom (Hong Kong) Ltd, the nation's second-largest mobile carrier by user numbers, to solidify its lead in the nation's third generation telecommunication services market, the company's chairman said.

"Looking ahead, I have never been so confident in the development of China Unicom's 3G business," said Chang Xiaobing, chairman of China Unicom (Hong Kong) Ltd, who is also the chairman of its parent company, China United Network Communications Group Co Ltd.

He made the remarks on the sidelines of the annual session of the Chinese People's Political Consultative Conference in Beijing.

Chang's comments signal that China Unicom's 3G business is performing well and the momentum is expected to persist well into the future.

The latest demonstration of the company's success was that, to the surprise of many analysts, China Unicom achieved its goal of a net addition of 25 million 3G users in the domestic market in 2011.

"Everything in China's 3G wireless market is changing so fast - the market is evolving and transitioning to a mature stage at a speed beyond imagination," Chang said.

He added that China's 3G user population was set to surge. "Affordable smartphones gained popularity in China last year, giving us an opportunity to reach more low- and middle-end consumers," Chang said.

Chang's confidence is solidly grounded. Though China Unicom's total mobile user base lags that of its chief domestic rival - China Mobile Ltd - the company boasts the fastest-growing 3G mobile population in China.

China Unicom achieved the biggest monthly net growth in 3G users for four months running, outstripping China Mobile to take top place last October.

In January, China Unicom's 3G subscribers totaled 43.07 million, up 3.05 million from December. China Mobile had 53.94 million 3G users and China Telecom had 38.7 million 3G subscribers at the same point.

"The total 3G user population for China Unicom is expected to surpass that of China Mobile by the end of this year," said Huang Meng, a telecom analyst with the Beijing-based research firm Analysys International.

That is because China Mobile adopted a relatively weak 3G technology and offered less attractive handsets to lure customers, while China Unicom has harvested the fruits of its successful 3G branding undertaken in 2009, according to Huang.

Chang has also gained confidence from China Unicom's effectiveness at marketing its 3G business.

The carrier got a head start by deploying the Wideband Code Division Multiple Access 3G network, which is more widely supported in the industry than any other 3G standard.

That advantage, in turn, helped China Unicom to become the first mobile operator to offer Apple Inc's iPhone series on contract in the Chinese mainland.

"After years of exclusive cooperation with Apple, China Unicom is like an Apple spokesman in China," said Sun Kai, a Beijing-based analyst with the researcher GfK Group.

Though China Telecom plans to start offering the iPhone 4S on the mainland starting Friday, most analysts doubt that it will overtake China Unicom in terms of iPhone sales.

"I think more than half of Chinese iPhone buyers will continue to choose China Unicom, rather than China Telecom, because China Unicom already has the upper hand," said Huang.

Chang doesn't seem concerned about China Telecom's move. "The Chinese market is big, and there's room for every player to do well," he said.

China Unicom's marketing strategy expands beyond iPhone handsets to include entry-level and affordable smartphones.

The company aggressively launched its 1,000 yuan ($158.30) smartphone promotion last June, which was more successful than anticipated with sales exceeding 10 million entry-level handsets within half a year.

Zhou Youmeng, general manager of the sales and marketing department at China Unicom (Hong Kong) Ltd, said the company would continue to focus on promoting low- and middle-end smartphones at prices ranging from 700 yuan to 2,000 yuan in 2012, which will allow China Unicom to expand its 3G service even further.

However, the carrier faces potential challenges. One of the biggest could be the start of commercial operations of China Mobile's TD-LTE 4G network.

There's been no sign that China Mobile would get government permission to launch a 4G network this year, but the world's biggest mobile carrier is actively promoting the project and hopes for significant progress next year.