China Unicom Beats 3G Goal - Analyst Blog
September 26 2011 - 1:33PM
Zacks
China's second largest mobile operator China
Unicom (CHU) added 2.36 million subscribers in August, up
1.28% from the prior month. This takes the company’s total customer
base to 186.1 million.
The company’s GSM subscriber base expanded to 158.23 million
with the net addition of 0.23 million customers, while its 3G
subscriber base increased to 27.87 million with the net addition of
2.05 million. 3G subscriber addition was higher in August than 1.87
million in July.
With the rise in 3G subscribers, China Unicom has achieved its
target of expanding the user base beyond 25 million by this year
end. Further additions would indicate growth prospects in China
Unicom’s mobile 3G business, and the resultant rise in average
revenue per user.
The company’s 3G business is performing well and is expected to
sustain the momentum well into the future as the biggest growth
driver. For the full year, capital spending on the 3G network is
estimated at RMB 73.80 billion.
We believe China Unicom will continue to make significant
progress in expanding economies of scale in 3G, broadband and other
businesses that will likely improve its overall revenue and
profitability. The company is offering 3G services in collaboration
with Research In Motion Limited’s (RIMM)
Blackberry phones.
However, China Unicom remains significantly challenged by
aggressive nationwide 3G service rollouts by its peers,
China Mobile (CHL) and China Telecom
Corp. (CHA). Moreover, high levels of marketing and
promotional expenditures related to 3G service deployments could
hurt profitability. Further, increased operating expenses coupled
with higher depreciation and amortization will have an adverse
effect on the company’s profitability, free cash flow and
margins.
We currently have a long-term Neutral rating on China Unicom.
The stock retains a Zacks #3 Rank (Hold) for the short term (1–3
months).
CHINA TELCM-ADR (CHA): Free Stock Analysis Report
CHINA MOBLE-ADR (CHL): Free Stock Analysis Report
CHINA UNICOM (CHU): Free Stock Analysis Report
RESEARCH IN MOT (RIMM): Free Stock Analysis Report
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