On May 26, 2014, we issued an updated research report on
China Unicom Hong Kong Limited
) - the second largest wireless operator in China. The company
posted strong first-quarter 2014 results with both the top and the
bottom line improving year over year on strong contribution from
its 3G and broadband businesses. CHU currently carries a Zacks Rank
The company also won the LTE-TDD (Time Division Duplex) license in
Dec 2013 and subsequently launched the service in Mar 2014. China
Unicom wants to focus on the globally accepted FDD (Frequency
Division Duplex) technology for its 4G service. The company could
get a major shot in the arm if it is able to quickly obtain the
FDD-LTE license, which according to media reports is expected
within the first half of 2014.
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. 3G remains a compelling opportunity and represents
the single biggest driver of the company's long-term growth. The
company exited the first quarter of 2014 with approximately 132.30
million 3G/4G subscribers with mobile revenues contributing around
63.4% to its total service revenue.
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 competitive landscape in the Chinese wireless
market has also intensified with the distribution of 4G licenses by
the Chinese government and big rival
China Mobile Ltd.
) aggressively rolling out its 4G services.
As the company is focused on having a 4G network based on FDD-LTE
technology, we believe the investment made by China Unicom on
rolling out a TD-LTE based service might not be beneficial in the
long run as it could lead to higher capital investment for the
Key Picks from the Sector
Other better-ranked stocks within the industry are
). KT and KYO currently carry a Zacks Rank #2 (Buy).
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CHINA MOBLE-ADR (CHL): Free Stock Analysis
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