China Unicom (Hong Kong) Ltd, the nation's second-largest mobile-phone company, is "confident" it will meet a target of adding 25 million subscribers to its third-generation (3G) network this year, President Lu Yimin told reporters on Tuesday.

Unicom, the only carrier to offer the iPhone on the mainland currently, is facing rising competition from rivals China Mobile and China Telecom, both of which are aggressively courting Apple Inc for the chance to offer the iPhone.

Unicom will be able to achieve its target of adding 25 million 3G users in 2011 despite a slowdown in new users in April, Lu told reporters after the company's annual general meeting, citing its new marketing strategies of offering a cheaper iPhone package as well as offering a 46-yuan 3G plan from May 17.

The company started offering a 66-yuan-a-month plan for the iPhone after previously setting the lowest-priced package at 96 yuan, he said.

The company added 1.82 million 3G subscribers for a total of 20.4 million in April, the company said earlier this month.

The April figure is smaller than the 1.85 million new subscribers Unicom posted in March.

Chairman Chang Xiaobing added that the company's 3G business development is quite healthy, which may be the reason for the big gain in Unicom's share prices in April despite the fact that the company's first quarter net profit tumbled 86 percent year-on-year to 166 million yuan ($25.56 million) due to the subsidies.

Unicom's mobile average revenue per user (ARPU) for 3G users in the first quarter was 117.2 yuan, down 5.5 percent from 124 yuan a year earlier, while only down 1.1 percent compared with the fourth quarter of 2010, which indicated that the slide in ARPU is slowing down, according to the company.

"The (poor) performance in the first quarter was mainly due to the subsidies for 3G handsets as well as the depreciation charges for equipment. We believe earnings will rebound along with the business and user growth," said Tong Jilu, the vice-president of the company.

"I'm not surprised that China Unicom can meet the target or even exceed it this year," said Victor Yip, UOB Kay Hian's telecoms analyst. "However, I am concerned more about how much they need to invest in terms of 3G subsidies to fulfill this target. The cost will weigh on the margins of the company."

Unicom's subsidy expenses on 3G handsets surged to 1.90 billion yuan in the first quarter from 10 million yuan a year earlier. The depreciation and amortization charges rose to 14.06 billion yuan from 13.17 billion yuan, while operating expenses including network support and employee benefits rose to 30.65 billion yuan from 22.29 billion yuan.

China Daily

(HK Edition 05/25/2011 page2)