We are maintaining our Neutral recommendation on China Unicom. The
company registered top and bottom-line growth in the first quarter
of 2014 owing to strong contribution from its 3G and broadband
businesses. We expect future performance of the company to be aided
by the well-performing mobile and broadband business, the expansion
of 3G network and strong sales of iPhones. We expect the company to
continue with its subscriber addition owing to network expansion,
low tariffs and bundled offerings. Further, a speedy rollout of the
faster HSPA+ network and collaborations with handset manufacturers
could create tailwinds going forward. Nevertheless, we remain
concerned about stiff competition, which can affect the company's
ARPU. The carrier continues to lag behind rival China Mobile in 4G
investments and subscriber addition. Additionally, access line loss
and high operating expenses can be a drag on its profits.
Beijing-based China Unicom Hong Kong Limited (previously known
as China Unicom Limited) provides a wide range of telecommunication
services throughout China. With approximately 30% share of the
total mobile phone users in China, the company is the second
largest wireless operator in the country, behind China Mobile.
Spanish Telecom giant Telefonica currently holds a 5.01% stake in
China Unicom's primary source of revenue is wireless service,
which is based on the global system for mobile communications (GSM)
technology standard. Other telecom services provided by the company
include domestic calling, international long distance, Internet
services, value-added services, information technology services and
advertising and media services.
China Unicom announced its restructuring deal in Jun 2008 to
merge with China Netcom, a fixed-line service provider in China.
The company officially completed its merger with China Netcom on
Oct 15, 2008. As a result, China Netcom became a wholly owned
subsidiary of China Unicom.
As part of the merger deal with China Netcom, China Unicom
disposed its CDMA wireless business to China Telecom, the largest
fixed-line operator in China, for approximately RMB43.8 billion
(US$6.4 billion). China Unicom is now focused on strengthening its
position in the domestic 3G wireless market, launching innovative
services and bundling fixed-line and mobile offerings to
subscribers. The combined company is considered the most
established in China in terms of international networking with 27
cross-continental cable systems and 19 international submarine
Following the completion of its merger with China Netcom, the
company restructured its reporting segments by merging data,
Internet and long-distance (previously reported separately)
together with the fixed-line business. As a result, China Unicom's
continued operation now consists of two reporting segments, namely,
mobile business (70% of 2013 revenues) and fixed-line business (30%
of 2013 revenues).
China Unicom (Hong Kong) Limited (CHU): Read the
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