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Penny Stock DD

China Unicom (Hong Kong) Ltd., the nation’s only mobile operator now offering Apple Inc.’s iPhone, said it will sell a self-developed smartphone called the “UPhone” by the end of this year.

The UPhone will run on a “totally new” operating system that Unicom developed based on Linux, Zhang Zhijiang, an official at the company’s technology department, said in an interview today at the Mobile Asia Congress in Hong Kong. The phone is being developed with Okwap, Huawei Technologies Co. and ZTE Corp., he said.

Chairman Chang Xiaobing has delivered four straight quarters of profit drops as he failed to capitalize on Unicom’s iPhone exclusivity and a third-generation wireless network that analysts say is superior to that of the industry leader, China Mobile Ltd. In the third quarter, Unicom added about 38 percent fewer 3G users than China Mobile even after rolling out the iPhone 4.

“I would view this as a negative, given that China Unicom’s WCDMA network is supposed to have the advantage over the other telcos and because of the mature handset supply chain,”Bertram Lai, head of research at CIMB-GK Securities in Hong Kong, said of the UPhone announcement in an e-mail today. “What happened to the iPhone super-high-end subscriber in China?”

The limited details released by Unicom today make the UPhone sound more like a low-end smartphone rather than a product comparable with the iPhone, said Paul Wuh, a Hong Kong-based analyst at Samsung Securities Co.

Unicom’s Zhang said the name of the device is a deliberate reference to the iPhone and other competing products such as Lenovo Group Ltd.’s LePhone.

“U means Unicom and ‘phone’ is just for phone,” Zhang said. “We just wanted to compare with the iPhone and LePhone.”

Regards,

Don

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