The second largest telecom operator in China -
China Unicom Ltd.
) - has received the green signal from the Ministry of Industry and
Information Technology (MIIT) to conduct a pilot test on two of the
most recognised 4G LTE (Long Term Evolution) standards. This is
deemed as an effort by the carrier to curb the current market
China Mobile Ltd.'
) dominant foothold in the market.
China Unicom will initially start the network trial by
integrating both the TDD-LTE (Time Division Duplex) and FDD-LTE
(Frequency Division Duplex) Standards in 16 different cities in the
mainland, including popular cities like Shanghai, Shenzhen,
Guangzhou and Xian, among others.
In Dec 2013, China Unicom won the LTE-TDD license. Soon after,
in Mar 2014, the company launched its 4G service in 25 cities based
on TD-LTE standards. However, skepticism lingered with regard to
the permanent adaptability of the LTE standard, as the carrier's 3G
standard (Wide Band Code Division Multiple Access or WCDMA) is
compatible with FDD-LTE.
Thus, rival China Mobile secured a competitive edge in 4G owing
to the compatibility of its 3G standard (Time Division Synchronous
Code Division Multiple Access or TDSCDMA) with TD-LTE. At the end
of May 2014, China Mobile had 8.11 million customers.
Beijing-based China Unicom has also launched 61 terminal
devices, which include branded mobile phones, smartphones, tablets
and data cards. More than one-third of these devices are capable of
supporting 4G network.
According to China Unicom, these hybrid options will allow it to
provide better connectivity through faster Internet download speed.
However, the carrier will have rival
China Telecom Corporation Ltd.
) for company, which recently won the approval to proceed with its
hybrid network trial test.
A 4G network based on the globally acceptable FDD-LTE standard
will allow China Unicom to improve its subscriber additions and
pose a bigger threat to China Mobile. Although still on a nascent
stage, the successful implementation of this hybrid network should
boost China's wireless market.
However, going forward, China Unicom needs to enhance its
handset portfolio, which will support its hybrid 4G network. The
carrier must also focus on aggressive promotion and competitive
tariff plans to earn a larger share of the pie. Further, we remain
concerned about the seamless transition of China Unicom's 3G
customers into its dual 4G network.
China Unicom currently carries a Zacks Rank #5 (Strong Sell). A
stock worth considering within the sector is
) with a Zacks Rank #1 (Strong Buy).
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