On Mar 5, 2014, we issued an updated research report on China Unicom Hong Kong Limited (CHU) – the second largest wireless operator in China. The company posted strong 2013 results with both top and bottom lines improving year over year on strong contribution from its 3G and broadband businesses. CHU currently carries a Zacks Rank #3 (Hold).
China Unicom has achieved a leading position in 3G and integrated innovation, and plans to focus on growth and efficiency over the next few years. The company remains committed tofaster broadband network, improve service quality and offer bundled services. China Unicom expanded its 3G base stations by 76,000 to 407,000 in 2013 to improve its network.
The company recently won the LTE-TDD (Time Division Duplex) license. However, China Unicom wants to focus on the globally accepted FDD (Frequency Division Duplex) technology and aims to provide 4G service by the end of 2014. The company plans to invest $1.65 billion (RMB 10 billion) with the majority of the amount dedicated toward W-CDMA and HSDPA upgrade, which will provide a solid base for its 4G mobile broadband rollout.
China Unicom continues to operate in a competitive landscape, which keeps its GSM ARPU under pressure due to an aggressive price war. Apart from 3G, the competition has intensified under pressure due to aggressive price.
Bigger rival China Mobile Ltd (CHL) is a leader in 4G deployment and is expected to install 500,000 base stations in 2014, while China Telecom Corp. (CHA) aims to establish 60,000 base stations by 2014. China Unicom lags both with only 50,000 base station deployments, which could affect its market share gains in the 4G space.
Key Pick from the Sector
A better-ranked stock within the industry is SK Telecom Corp Ltd (SKM). SKM currently carries a Zacks Rank #1 (Strong Buy).