Abstract

In the past, China Unicom has focused mainly on the development of its CDMA mobile phone service. Having upgraded its CDMA network to CDMA 1x by the end of 2004, China Unicom has worked with its service providers to roll out a wide range of value-added mobile data services. However, many of these services are in their infancy, and China Unicom's CDMA subscriber base has not grown as rapidly as the company had originally hoped, with only 32.7 million subscribers in late 2005. Currently, SMS still accounts for the bulk of China Unicom's revenue from CDMA value-added services.

Nevertheless, China Unicom has continued to introduce new value-added services, such as RedBerry push e-mail service, which was launched before rival China Mobile rolled out their own push e-mail service. It remains to be seen how successful these new services will be; even so, their launch provides clear evidence of China Unicom's determination to pursue faster subscriber growth and to increase its market share.

Recognizing its limitations in CDMA network development, China Unicom has been actively seeking out international companies for cooperation, with SK Telecom being the most important of these partners. Given the differences between Korea and China in terms of market environment and consumer habits, it remains to be seen how useful SK Telecom's experience will be to China Unicom as it works to improve the operational performance of its CDMA business.

It was not until 2006 that China Unicom began to upgrade its GSM mobile phone network to GPRS. As a result, currently, the only data services that China Unicom can provide to GSM subscribers are SMS and personalized ring-tones. However, in 2006 China Unicom began to allocate more resources to developing its GSM network. It can be anticipated that, as the process of GSM network upgrading proceeds, China Unicom will gradually introduce more data services for GSM subscribers.

With the Chinese government expected to award 3G licenses in the near future, China Unicom -which has both CDMA and GSM networks -will find itself with a difficult choice to make. Although China Unicom has more GSM subscribers than CDMA subscribers, its GSM subscriber base is much smaller than China Mobile's. Focusing on CDMA and failing to upgrade the GSM network to GPRS for several years caused China Unicom to miss an important opportunity to develop subscribers and value-added services in its GSM business. While China Unicom's CDMA network is able to offer a wide range of value-added services, subscriber growth has been slow due to the positioning of the service; the CDMA subscriber base is still much smaller than the GSM subscriber base. This puts China Unicom in a difficult position in the price-sensitive China market. China Unicom's next step will depend largely on the Chinese government's 3G policy. Given that China Unicom's annual revenue is currently around half that of China Mobile, and that China Unicom already has a CDMA network, it is highly likely that China Unicom will be awarded a CDMA 2000 1x EV-DO (Evolution Data Only) license. If so, then it is anticipated that, working with Qualcomm and SK Telecom, China Unicom will speed up the development of its value-added services and close the gap between itself and China Mobile.

Appendix

List of Companies