China Unicom Limited
) recently announced its plan to hold back its 4G LTE deployment
cost for the year, mainly buoyed by 4G LTE spectrum licenses to
be issued by the Ministry of Information Industry (MII) in China
by the end of 2013.
At the end of the first nine months of 2012, China Unicom has
a cash position of $1945 million and a debt of $216 million. The
company also plans to slowdown its 4G LTE deployment goals as the
company may require more funds in the upcoming 4G LTE license
In China, 3G service was launched in Aug 2009 by
China Mobile Limited
China Telecom Corp.
) and China Unicom. China Unicom offered its 3G service through
WCDMA technology while the other two China Mobile and China
Telecom delivered 3G service through TD-SCDMA and CDMA standard,
By the end of 2012, these three telecom companies together
gained 247.2 million 3G subscribers out of its total 1.12 billion
mobile customers. Such growth in 3G subscribers were well
supported by higher adoption of smartphones, which in turn gave
rise to increased internet usage and higher ARPU growth.
Besides, availability of popular
) new iPhones 5 and Samsung Galaxy S 3, which support 4GLTE
connections, will further accelerate data usage. So taking that
into consideration, we believe that MII may start 4G spectrum
auction by the end of this year.
World's largest telecom carrier, China Mobile has already set
an annual target to roll out 4G LTE service across 100 cities in
China and will also deploy 200,000 base stations by the same
period. Moreover, the telecom giant also plans to sell at least
120 million handsets based on TD-SCDMA standard by the end of the
third quarter of 2013.
In contrast to this move, China Unicom has not done much
regarding its 4G LTE deployment goal. Moreover, we believe that
most of company's cash will be utilized to secure 4G licenses,
which in turn will further delay 4G LTE rollouts. So we expect
that the company will issue more bonds and senior notes as well
as expand its debt position in the upcoming years to finance its
4G LTE service deployments.
Currently, China Unicom has a Zacks Rank #2 (Buy).
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