CHT Global, the U.S. subsidiary of Chunghwa Telecom Co. Ltd. (CHT - Analyst Report) has entered into an agreement with the third-largest U.S. telecom carrier Sprint Nextel Corp. (S - Analyst Report). Per the deal, CHT Global will become a mobile virtual network operator (MVNO) of Sprint. The company will provide wireless data services to several enterprises and traveling business professionals using Sprint’s 3G and 4G LTE network.
The contract-free service will be known as “CHT Global Mobility” and will have a monthly access fee of $5.99 per device for 100 Mb data usage. Extra money will be charged once data usage exceeds 100 Mb. Enterprises can purchase devices upfront in full or they can opt for a 1 to 2 year financing plan.
We believe agreement with Sprint to enter the U.S. markets is vital for Chunghwa. The company is the largest integrated telecommunications service provider in Taiwan. However, theTaiwanese telecom market is oversaturated and has become extremely competitive following telecom regulatory changes.
Chunghwa competes in a tough environment with two other major service providers, Taiwan Mobile Company and Far EasTone Telecommunications Co. Ltd. The market size is small in comparison to other countries, with approximately 23 million potential customers. At present, Taiwan has 115% wireless penetration. We expect fierce competition in the future.
Thus, it is essential for Chunghwa to explore the overseas markets. The company is trying hard to get a solid foothold in the mainland China. If the wireless and the Internet and data segments are unsuccessful in gaining new business, Chunghwa’s top line may be severely affected.
Other Stocks to Consider
Currently, Chunghwa has a Zacks Rank #3 (Hold). Other stocks in the non-U.S. telecom industry which are performing well include NipponTelegraph and Telephone Corp. (NTT - Snapshot Report) and Shenandoah Telecommunications Co. (SHEN - Snapshot Report). Currently, both the companies carry a Zacks Rank #1 (Strong Buy).