(Adds more comments from executives on the company's 3G business.)
By Lorraine Luk
Of DOW JONES NEWSWIRES
HONG KONG -(Dow Jones)- China Unicom (Hong Kong) Ltd. (CHU), which started offering Apple Inc.'s (AAPL) iPhone in China last week, is targeting increasing the number of its third-generation mobile users by more than 1 million a month, Chairman Chang Xiaobing said Tuesday.
The company launched 3G services in China Oct. 1 and had more than 1 million subscribers to the mobile technology standard at the end of that month, Chang said.
He said China Unicom has signed up more than 5,000 iPhone users in China since it launched the phone there Friday and it expects the Apple phone to boost its average revenue per user. The company is the only seller of the iPhone in China at the moment, though China Mobile Ltd. has said it is in talks with Apple.
But analysts say China Unicom's high pricing of the iPhone will limit demand for the product.
China Unicom has been selling the 32-gigabyte iPhone 3GS for CNY6,999 ($1,024) without a service contract, higher than the around $800 consumers pay for the same product in Hong Kong, which has different wireless carriers than on the mainland.
Chang said the company hopes to offer more low-cost smartphones to drive its 3G business.
Analysts also said China Unicom's earnings will decline in the short term because of its 3G startup costs and as its fixed-line business comes under growing pressure from subscribers switching to mobile phones.
The fixed-line business accounted for about 50% of the company's first-half revenue excluding upfront connection fees of CNY74.23 billion.
"In the early investment stage of our 3G business, we will see revenue growth and user addition lagging behind the increase in operating expenses and network costs, but this will be temporary," Chang said.
China Unicom Chief Financial Officer Tong Jilu said the company expects its 3G operating expenses, which include handset subsidies and advertising expenses, to account for 30% of total 3G revenue in 2010.
Competition in China's telecommunications market has intensified since the government awarded 3G operating licenses to China Unicom, China Mobile and China Telecom Corp. in January.
All three companies have been striving to roll out new 3G services with lower tariffs and higher handset subsidies to boost demand.
-By Lorraine Luk, Dow Jones Newswires; 852-2802-7002; lorraine.luk@dowjones.com