China Unicom Sinks on Expansion News

The telecom's shares are down because the costs of expanding the network are higher than expected.
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Chinese wireless provider

China Unicom

(CHU) - Get Report

said it will spend $14.5 billion over the next two years to build out its high-speed 3G network.

After completing its acquisition of fixed-line services company

China Netcom

(CN) - Get Report

, China Unicom said it will obtain a 3G spectrum license and that the wireless capital expenditure of the company is "expected to be very substantial." The company said costs may reach 100 billion yuan, or $14.5 billion, in 2009 and 2010.

The announcement sent shares lower as industry observers hadn't expected wireless capital expenditure spending to climb that high. Shares of China Unicom were sliding 90 cents, or 4.6%, to $18.58. The stock was down 4.3% in Hong Kong trading. Merger mate China Netcom was off 4.4% to $55.75.

In June, China Unicom announced its $56.3 billion stock-swap deal to acquire China Netcom shortly after Chinese officials announced a plan to merge six state-owned phone providers into three in a move designed to offer more competition for

China Mobile

(CHL) - Get Report

, which has the largest subscriber count in the world, with nearly 400 million.

One the restructuring is complete, three 3G spectrum licenses will be granted to the merged companies.

China Telecom

(CHA) - Get Report

will use a CDMA network, while a merged China Unicom and China Netcom is expected to build out a 3G network based on WCDMA technology. China Mobile would be committed to operating a TD-SCDMA network.

Among the other Chinese telecom names, China Mobile was trading down 0.8% to $58.31. China Telecom was losing 2.3% to $49.97.