Lehman sees catalyst for China Unicom (CHU) breakup

Includes: CHA, CHL, CHU, CN-OLD
by: Ezra Marbach

Even though China Unicom (ticker: CHU), China's second largest mobile operator, denied again today that it is in talks to sell one of its networks, Lehman Brothers believes that CHU’s latest weak operating numbers may be a catalyst to further industry restructuring - and the breakup of Unicom. Here are the latest results:

  • This morning, China Unicom released disappointing CDMA subscriber data for January of 554,000 net additions
  • Unicom had 1.1 million net additions in the same period last year
  • Average net monthly additions over 2H 2004 were approximately 690,000
  • Handset shortages, better PHS traction and some potential industry restructuring affected trends
  • Handset shortages are now expected to be resolved in April. Unicom recently bought a bulk purchase of low-end CDMA handsets
  • GSM net additions were in line with average 2004 run rates - at 882,000

China Mobile reporting subscriber trends on Monday Feb 21st:

  • Lehman anticipates monthly net additions to be stable. China Mobile continues to leverage its large distribution network and successful handset customization efforts

A chart of China Unicom's latest stock market performance: