China Unicom’s agreement to offer the Apple iPhone 3GS may take a bite out of the Beijing company’s bottom line. The wireless carrier’s costs for marketing and subsidies may outweigh sales of iPhones and subscriptions.
Since solidifying its three-year, non-exclusive deal with Apple to sell the iPhone 3GS, China’s number-two wireless carrier said Tuesday that it has secured one million new 3G network subscribers since the launch and foresees adding an additional one million subscribers each month. The company claims to have 5,000 subscribers already signed up for the iPhone 3GS in just four days since its launch.
Analysts, however, said the cost associated with rolling out the 3G (WCDMA) network, advertising and marketing the iPhone may take a toll on China Unicom’s bottom line.
China Unicom, number two behind China Telecom, began focusing on its 3G network construction in January when it received its 3G operating license. The company has been able to reduce some costs due to bulk purchases, but expanded coverage from the original 284 cities planned earlier in the year to 335 has increased the rollout cost.
The company, however, isn’t alone. China Unicom and its top rivals China Telecom and China Mobile have all had to deal with costs associated with the new 3G network, and all reported lackluster quarterly earnings last month.
The financial woes will not change for some time because of marketing expenses and network construction costs, Tong Jilu, vice president and chief financial officer at Unicom, told Reuters.
After reaching its multi-year agreement with Apple to sell the iPhone, China Unicom said it will implement several measures to steadily grow its mobile business while cushioning the decline of its landline business.
With 5,000 iPhone subscribers signed up, China Unicom is confident that the launch of the iPhone 3GS, which will…