China Unicom plans to spend up to Rmb100bn ($14.5bn) in the next two years to improve its network as the country’s second-largest wireless operator prepares to introduce third-generation services.

Analysts, who called the expenditure plan “very aggressive”, said it signalled an intense price war between Unicom, China Mobile and China Telecom as China’s three telecoms companies gear up to expand their operations.

“[Rmb100bn] is a big and scary number. Every company seems to be spending a lot to upgrade their networks. It implies pretty heated competition,” said Marvin Lo, analyst at Daiwa Institute of Research, who had expected Unicom to spend up to Rmb66bn.

Beijing this year announced a long-delayed plan to reorganise the telecoms sector, creating three operators with both mobile and fixed-line networks. The restructuring is a prelude to the introduction of 3G mobile services, although it remains unclear when they would be launched.

Under the arrangement, Unicom is to merge with fixed-line operator China Netcom. Unicom said on Wednesday the combined group, to be called China Unicom (Hong Kong), was expected to receive a 3G licence following the merger, likely to be completed in the fourth quarter.

“Upon the completion of the proposed merger, the enlarged group is expected to obtain a 3G licence. As a result of the proposed merger, the wireless capital expenditure ... is expected to be very substantial and may reach Rmb100bn in 2009 and 2010,” said Unicom. The capital expenditure will be spent on such areas as 3G equipment and upgrading the 2G network.

Shares of Unicom and Netcom fell 4.3 per cent and 3.9 per cent respectively in Hong Kong on Wednesday as investors were concerned about the high spending amount, which will be borne by the listed arms.

China Telecom, which has acquired a CDMA mobile network from Unicom, said last month its parent planned to spend Rmb80bn over the next three years to upgrade the system. Unicom continues to operate a GSM network, which is more profitable and bigger than CDMA.

China Mobile said in March it had budgeted Rmb127.2bn for capital expenditure this year, Rmb119bn next year and Rmb109bn in 2010.

China Mobile currently has a 70.8 per cent market share of the country’s wireless market – the world’s largest in terms of subscribers.

Unicom’s GSM operation has a 21.8 per cent share while the CDMA business accounts for just 7.4 per cent. China Telecom has said it aimed to capture 15 per cent of the market by 2010.

Mr Lo expected China Mobile’s share of the market to drop to about 67 per cent in 2012, while that of Unicom would climb to 28 per cent, possibly at the expense of huge handset subsidies.