Thursday, December 31, 2009

CHU China United Network Communications Ltd. ADR

CHU China United Network Communications Ltd. ADR

In July, I was reading China Tech News on line magazine and was intrigued by the information about CHU and AAPL. It was announced that they, CHU would get the exclusive license for the iPhone in October 2009.

China Unicom is the second-largest fixed-line and mobile carrier in China. In January 2009, the carrier was awarded the license to provide 3G services using the WCDMA technology and has since rolled out the services on a trial basis. The Chinese government owns 57% of the company. Korean carrier SK Telecom owns 3.8%, while Spanish carrier Telefonica owns about 5.4% after converting its stakes in China Netcom to China Unicom.

The portfolio bought into this slowly over a three month period from July to October and raised its stake quite a bit on a recent low of 12.50 a share. The stock accounts for about 5% of The Salve Lucrum Portfolio and is currently down about 7%. It has been down as much as 11% bypassing my hard and fast rule of selling on an 8% drop. Emotions may be playing into this equation a bit, but I am hoping for the logic of Chinese iPhone success, 3G and 4 G networking expansion (Which CHU is hugely investing in.), will make this the Verizon/ATT of China in two years.

They are taking on quite a bit of debt building the 3G networks, but they have a wealthy uncle (China) who can help them finance the debt. This will probably trade sideways for most of 2010. I will be looking for buying opportunities below 12.50 when they happen to add to my position.


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