China's second largest mobile operator China Unicom (CHU) added 3.4 million cellular subscribers in July, up 2.0% from the prior month. This takes the company’s total customer base to 222.66 million.
The company’s GSM subscriber base expanded to 162.05 million with net addition of 0.33 million customers, while its 3G subscriber base increased to 60.62 million with net addition of 3.09 million. China Unicom added more 3G subscribers in July compared to 3.03 million in June.
The 3G subscriber growth came on the back of Apple Inc.’s (AAPL) iPhone sales. Additionally, China Unicom is focusing more on improving its 3G data surfing service, and offering cheaper handsets and low cost services to woo new customers. These efforts are drawing more 3G subscribers, eventually leading to higher average revenue per user.
Despite the loss of the exclusive hold on iPhones to China Telecom Corp. (CHA), the company’s 3G subcriber growth remained encouraging in July relative to its major rival China Mobile (CHL), which attracted only 1.9 million 3G subscribers.
China Unicom expects its 3G subscriber base to reach 90 million by the end of the year, taking the 3G service revenue to RMB 70 billion ($11.1 billion) from RMB 40 billion last year.
Coming to the fixed-line business, the company is poised to benefit from expansion and speed enhancement of fiber optic service in its broadband business. China Unicom added 0.81 million broadband customers in July, bringing the total number to 61.33 million. Despite the ongoing fixed-to-mobile substitution, China Unicom succeeded in adding 0.01 million local access customers, bringing the base to 92.58 million in July.
We are maintaining our long-term Neutral recommendation on China Unicom. The stock retains a Zacks #3 (Hold) Rank for the short term (1–3 months).
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