China Unicom to Spend $14.6 Billion to Expand Network

China Unicom to Spend $14.6 Billion to Expand Network

China Unicom Ltd., the nation's second-biggest mobile-phone carrier, said it may spend as much as 100 billion yuan ($14.6 billion) to expand wireless networks as it seeks to narrow the gap with China Mobile Ltd.

The proposed investment covers spending in 2009 and 2010, according to a Unicom statement to the Hong Kong stock exchange today. The Beijing-based company said previously 2008 capital expenditure on its wireless network would be 18.7 billion yuan.

The increase will allow Unicom, whose market share is less than half China Mobile's, to add networks in rural areas and introduce third-generation services. Competition in the world's biggest phone market will intensify as carriers are now permitted to offer both fixed-line and wireless services following a government plan to reorganize the industry.

``Unicom needs to upgrade its networks to become more competitive,'' said Kelvin Ho, who rates the stock ``neutral'' at Nomura Holdings Inc. in Hong Kong. ``On a per-user basis, the spending announced by Unicom is lower than'' that indicated by China Telecom Corp., he said.

Under the government reorganization, the company will sell the smaller of its two mobile-phone businesses, based on code- division multiple access technology, to China Telecom. Unicom's bigger network, based on the global system for mobile communications, or GSM, standard, had 127.6 million customers at the end of June, compared with 43.2 million CDMA users.

Industry Revamp

China Telecom, the nation's biggest fixed-line carrier, said last month its parent will invest at least 80 billion yuan in the CDMA network in the next three years.

Three 3G licenses will be issued when the industry revamp is completed, the government said in May. As part of the government's reorganization proposal, Unicom will buy fixed-line carrier China Netcom Group Corp., and China Mobile's parent will buy China Tietong Telecommunications Corp.

Unicom expects to receive a license for 3G services, which allow faster downloads of music and video on mobile phones, when it completes the acquisition of China Netcom, according to today's statement. The stock-only transaction was valued at HK$187 billion ($24 billion) in June, when it was announced.

China Mobile had 414.6 million customers at the end of June, more than twice the combined total of Unicom's GSM and CDMA businesses.

Unicom shares fell 4.3 percent to close at HK$14.80 in Hong Kong trading, compared with a 1.5 percent decline in the city's benchmark Hang Seng Index.