CHU China Unicom Ltd

We reaffirm our Neutral recommendation on Chunghwa Telecom Co. Ltd. (CHT) following its strong performance in the third quarter of 2011. The company is the largest integrated telecommunications service provider of Taiwan. The company offers a full suite of telecom services through fixed-line, mobile, and data networks throughout Taiwan and in offshore islands. Although fixed-line offerings became relatively saturated, we believe Chunghwa’s mobile and Internet/Data operations will drive overall growth over the next several years.

Aggressive roll-out of fiber-to-the-home and 3G mobile services have placed the company ahead of its competitors. Chunghwa has also expanded into IPTV and cloud-computing services. The company is trying hard to get a strong foothold in China. We believe Chunghwa is at present fairly valued since the stock price has moved up by over 40% last year and is currently at its 52-week high range.

Chunghwa is the dominant telecom operator in Taiwan. It holds 80% of broadband market share, coupled with 96% of local fixed-line and 77% of long-distance fixed-line market share. The company also commands 34% of the Taiwanese wireless market share. A recent ruling of the Taiwanese government has changed the pricing right of a landline-to-mobile call in favor of the fixed-line operator from mobile operator. This shift in government policy boosted Chunghwa’s revenue. Management sets a yearly revenue target of approximately $7.6 billion by 2015.

Chunghwa operates in a competitive environment with Taiwan Mobile Company and Far EasTone Telecommunications Co. Ltd. The company is trying hard to enter into the Chinese telecom market. It entered into agreements with China Telecom Corp. Ltd. (CHA) and China Unicom Ltd. (CHU) to access software from their application stores for providing premium services to its subscribers.

 
CHINA TELCM-ADR (CHA): Free Stock Analysis Report
 
CHUNGHWA TELECM (CHT): Free Stock Analysis Report
 
CHINA UNICOM (CHU): Free Stock Analysis Report
 
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