PREVIEW-China telcos under pressure, could get worse

* WHAT: China’s three telcos to report Q1 results

* WHEN: China Mobile on April 20, Unicom 28th, Telecom 29th

* Unicom, Telecom profits seen down, China Mobile up
slightly

* Unicom could turn up heat in already-competitive market

By Doug Young

HONG KONG, April 16 (BestGrowthStock) – China’s No.2 telephone
company, China Unicom (0762.HK: ), could turn up the heat in the
nation’s already competitive mobile market as it fights to
arrest a slide in market share and rising pressure on profits
across the industry in the first quarter.

Industry leader China Mobile (0941.HK: ) and No.3 carrier
China Telecom (0728.HK: ) have aggressively promoted their 2G and
3G wireless services over the past year following a broad
industry overhaul, but Unicom has largely laid low since that
time.

With the company steadily losing share in the world’s
largest mobile market, many believe it is only a matter of time
before Unicom — the sole seller of Apple’s (AAPL.O: ) iPhone in
China — becomes more aggressive, putting already weak profit
trends under further pressure.

“Competition between China Telecom and China Mobile has
stayed relatively stable,” said CLSA analyst Elinor Leung.

“The new unknown is Unicom, and whether they will increase
their promotions. They’re still relatively conservative, but if
they want to achieve their 3G targets they will have to be more
aggressive.”

Third generation, or 3G, services provide access to
high-speed wireless data, video and other advanced content, in
addition to traditional telephone calls.

China’s three telcos spent about $21 billion building their
3G networks in 2009, following the issue of licenses early in
the year. Analysts expect 3G spending this year to fall about
20 percent.

Unicom is expected to fare the worst when the three
carriers report their first-quarter results, starting with
China Mobile on April 20, followed by China Telecom and Unicom
on April 28 and 29, respectively.

Unicom is expected to report a profit decline of more than
50 percent to 1.68 billion yuan ($246 million), according to
the average forecast of three analysts polled by Reuters.

China Mobile is expected to post a 7 percent profit gain to
27 billion yuan, while China Telecom is forecast to record an
11 percent fall in profit to 4.2 billion yuan, the poll
indicated.

The results will mark the first time all three companies
have comparable year-earlier figures, following the industry
overhaul that saw the number of players reduced to three from
four, and those three each awarded a third-generation (3G)
mobile license.

Since that time, the trio have taken different tacks on 3G,
with China Telecom the most aggressive in promotion of its
network based on the CDMA 2000 standard.

China Mobile, the world’s largest carrier with more than
500 million subscribers, has continued to aggressively promote
its older 2G network, but has been more cautious on its 3G
system, based on a homegrown Chinese standard called TD-SCDMA.

China Unicom has been the most cautious of the three,
preferring to keep 3G as a premium service — a strategy that
has cost it market share and put pressure on profits.

Shares in China Unicom have underperformed so far this
year, falling around 11 percent compared with a 20 percent rise
for China Telecom and a 10 percent rise for China Mobile.

According to figures provided by the companies, China
Mobile had 10.6 million 3G users at the end of February, while
Unicom had 4 million. China Telecom had about 4 million 3G
users at the end of 2009, out of a total mobile industry
subscriber base of more 700 million.

Stock Market Report

(Additional reporting by Melanie Lee and Kelvin Soh; Editing
by Chris Lewis and Lincoln Feast)

PREVIEW-China telcos under pressure, could get worse