China Unicom may find it hard to benefit from its shared 75 percent acquisition of Nigerian Telecommunications Limited (Nitel), according to analysts.
Xiang Ligang, a telecoms expert who runs a major website in China, said lack of funds may make it difficult for China Unicom to expand overseas, and the Nigerian deal will not provide a handsome reward for the company.
In addition, the expenses incurred from the construction and operation of China Unicom's 3G business - which is still in its initial phase - will weigh heavily on the company, especially as it faces intense competition from the other domestic operators - China Mobile and China Telecom, said Xiang.
The Nigerian government on Tuesday approved the $2.5 billion sale of its troubled state-run Nitel to a consortium led by China Unicom, according to a report from Wall Street Journal.
The consortium, which expects to gain a 75 percent stake in Nitel, now has 10 days to pay the bid security price and 60 days to finance the full bid amount.
If the deal is successfully sealed, China Unicom will become the second Chinese operator to expand in overseas markets, the first being China Mobile.
The latter has invested more than $1.6 billion and has attracted about 6 million mobile phone subscribers in Pakistan since entering the country in 2007.
Wen Baoqiu, director of China Unicom's information division, declined to comment on foreign reports relating to the company's purchase on the African continent.
He said that people who need further information can consult the company's announcement from Feb 22, 2010.
The statement said that its European subsidiary, China Unicom (Europe) Operations Ltd, had expressed an interest in a technical partnership with Nitel, and in the possibility of an equity investment, but negotiations failed to get off the ground.
The nation's second-largest wireless operator said in August that net profits in the first half fell 61.8 percent to 2.53 billion yuan ($371 million), dragged down by the fledging 3G business.
Adding to China Unicom's problems is the fact that there is no example of a Chinese operator running a successful business overseas.
Although the Pakistan branch of China Mobile has become the fifth largest telecom operator in the region, it has yet to make a profit there, said Xiang.
Ji Chendong, an analyst with research firm Frost & Sullivan, said there is uncertainty as to whether China Unicom can attract enough customers in Nigeria, because of cultural and legal differences there.
