China Unicom Adds 3G Subscribers - Analyst Blog
July 19 2011 - 3:15PM
Zacks
China's second largest mobile
operator China Unicom (CHU) added 2.28 million
subscribers in June, up 1.27% from the prior month. This takes the
company’s total customer base to 181.62 million.
The company’s GSM subscriber base
rose to 157.67 million with the net addition of 0.42 million
customers, while its 3G subscriber base increased to 23.95 million
with net addition of 1.86 million in June. China Unicom added more
3G subscribers in June compared to 1.74 million 3G subscribers in
the last month. With the growth in subscribers, the company appears
on track to reach its 25 million target for fiscal 2011.
The company’s 3G business is
performing well and the momentum is expected to continue well into
the future. 3G remains a compelling opportunity and represents the
single biggest driver of the company’s long-term growth. For the
full year, capital spending on 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. Additionally,
the company has the exclusive right to distribute Apple
Inc.’s (AAPL) iPhone in China. China Unicom is also
in talks with Apple to sell the iPad by the end of 2011.
China Unicom’s 3G and fixed-line
broadband businesses have been ramping up since last year. However,
these businesses are expected to remain under pressure due to
increasing depreciation and amortization expenses; networks,
operations and support expenses; as well as selling expenses for
the remainder of this year. We believe these expenses will have an
adverse effect on the company’s future profitability, free cash
flow and margins.
Further, higher handset subsidies
and increased costs related to 3G service deployments will continue
to be headwinds for the company. Despite these challenges, we
expect China Unicom to benefit from new users this year.
China Unicom is offering handsets
at subsidized rates with lower 3G service plans for multi-year
contracts to retain existing customers and add new ones. This will
weigh on the company’s future overall average revenue per user.
Moreover, China Unicom remains significantly challenged by
aggressive nationwide 3G service rollouts by its peers
China Mobile (CHL) and China Telecom
Corp. (CHA).
We currently have a long-term Neutral rating on China Unicom.
The stock retains a Zacks # 3 (Hold) Rank for the short term (1–3
months).
APPLE INC (AAPL): Free Stock Analysis Report
CHINA TELCM-ADR (CHA): Free Stock Analysis Report
CHINA MOBLE-ADR (CHL): Free Stock Analysis Report
CHINA UNICOM (CHU): Free Stock Analysis Report
Zacks Investment Research
China Unicom (NYSE:CHU)
Historical Stock Chart
From Jun 2024 to Jul 2024
China Unicom (NYSE:CHU)
Historical Stock Chart
From Jul 2023 to Jul 2024