China Unicom hopes to increase its customer base by offering contract customers free mobile Internet until the end of March. [China Daily]

China Unicom started offering free Wi-Fi (wireless Internet) access until the end of March for customers who have signed a contract, in order to catch up with its competitors China Mobile and China Telecom, and boost its 3G business in China.

Since China Unicom launched its Internet-capable smartphones, including last year's Wi-Fi-enabled iPhone 3GS, services utilizing the Internet have become increasingly important for the company to compete with its rivals.

"China Unicom is partially forced to offer Wi-Fi access, because China Mobile and China Telecom already began offering similar services last year," said Jake Li, an analyst at Guotai Junan Securities.

To maintain 3G users and provide added value to China Unicom's brand, the company needs to launch this service for its customers, said Li.

By the end of 2009, China Telecom had already set up more than 100,000 Wi-Fi access points nationwide and China Mobile had more than 90,000 access points, while China Unicom had only 25,000 access points in 2009. Although it set up more in 2010, the figure is still far below the other two, according to data from IT research company iSupply.

"Now that the three operators are competing intensively to attract more 3G users, China Unicom will build more Wi-Fi access points to promote its brand this year," said Li. 3G services and Wi-Fi have become another battlefield for the operators, he said.

According to data from China Mobile last year, 60 percent of mobile users access the Internet with their cell phones. China Mobile Chairman Wang Jianzhou said in an earlier report that the growth rate of voice calling and text messaging slowed in 2010, but data services increased 150 percent year-on-year. Data services now account for more than 30 percent of China Mobile's sales revenue.

Chang Xiaobing, chairman of China Unicom, said in a report last year that voice-calling services are nearly saturated in China, so the profit margin for voice calling decreased while profit from data services is booming. Consequently, the company hopes that providing free Internet access will increase the number of users.

According to Li at Guotai Junan Securities, from January to November 2010, China Mobile acquired about 8.8 million new 3G users, China Unicom had 11 million and China Telecom had 8 million. "China Unicom slashed the price for the iPhone 3GS recently to spur its 3G business," said Li.

To get the free Wi-Fi access, China Unicom customers need to send a text message to its service hotline and a login password will be sent back immediately. According to the company, the amount of data transfer and duration of the Internet access will be unlimited.