CHINA Unicom (Hong Kong) Ltd, the nation's No. 2 telco, yesterday said its profit margins will be "under pressure" as it faces higher costs to expand coverage this year.

The company will boost capital spending 30 percent to 100 billion yuan (US$16 billion) this year, Chief Executive Officer Chang Xiaobing said at a press conference in Hong Kong. Profit margins "will be under pressure" this year as China Unicom faces higher marketing and network costs, Chief Financial Officer Li Fushen said.

China Unicom yesterday reported 2011 profit that missed analyst estimates on rising marketing costs. The telco added record numbers of smartphone users each month from October through December as it won customers for mobile data with subsidies on handsets, including Apple Inc's iPhone. That gave the company 40 million subscribers on its 3G network at the end of last year, while also boosting costs.

"There are more iPhone and smartphone users on the network, so they have to expand capacity, coverage, and improve network quality," Kelvin Ho, a Hong Kong-based analyst at Yuanta Securities Co, said yesterday. "They have to spend more or the window of opportunity will be missed."

Net income rose 14 percent to 4.23 billion yuan last year, from a restated 3.7 billion yuan a year earlier, the company said.

That missed the 5.18 billion yuan average of 20 analyst estimates compiled by Bloomberg News.