New China Unicom Handset Subsidiary: Development Status

Ezcom, 11/14/08

A knowledgeable source has revealed that China Unicom (NYSE: CHU; 0762.HK; 600050.SH) has essentially completed splitting-off its Unicom Huasheng handset procurement subsidiary, with Unicom taking over some of the former subsidiary's assets to form "Unicom Huakai." After splitting-off the company, Unicom Huakai received the rights to 5 dual-mode GSM/CDMA handsets (4 Samsung handsets and one Yulong Coolpad handset) from the former Unicom Huasheng, and will initially continue to deal in dual-mode GSM/CDMA handsets.

After China Telecom's (NYSE: CHA; 0728.HK) acquisition of Unicom's CDMA networks and service centers, Unicom Huakai has been unable to use its parent company's CDMA service centers to sell phones. A source inside the mobile industry revealed that now many of Huakai's efforts will be focused on rebuilding sales channels and choosing resellers. A source inside Unicom says that Huakai is currently focusing on provincial-level and regional-level sales, with direct sales retailers and IT malls as auxiliary channels. Direct sales retailers include Gome (0493.HK), D.Phone, Suning (002024.SZ), and Samsung outlets. The company also has several dozen provincial-level retailers. In October, its first month of operations, Huakai sold nearly 80,000 handsets for revenues of over RMB 300 mln.

Editor's Note: For more background on China Unicom's new handset subsidiary, please see "Unicom Handset Procurement Subsidiary Completing Registration", MD 9/23/08 issue.

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