The Zacks Analyst Blog Highlights: MarkWest Energy Partners, China Mobile, China Unicom, China Telecom and Apple

Mar 08, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, March 8, 2013 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include MarkWest Energy Partners LP (NYSE: MWE), China Mobile Limited (NYSE: CHL), China Unicom Limited (NYSE: CHU), China Telecom Corp. (NYSE: CHA) and Apple Inc. (Nasdaq: AAPL).


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Here are highlights from Thursday's Analyst Blog:

MarkWest Downgraded to Strong Sell

Zacks Investment Research downgraded Colorado-based MarkWest Energy Partners LP (NYSE: MWE) to Zacks Rank #5 (Strong Sell) on Mar 5.

Why the Downgrade? MarkWest Energy witnessed sharp downward estimate revisions after reporting disappointing fourth-quarter 2012 results. In fact, this natural gas processor and distributor delivered negative earnings surprises in 3 of the last 4 quarters with an average miss of 9.72%.

On Feb 27, 2013, MarkWest Energy reported weak fourth quarter 2012 results, reflecting lower commodity prices.

The partnership's profit per unit – excluding mark-to-market derivative activity and compensation expense – came in at 22 cents against the Zacks Consensus Estimate of 36 cents. MarkWest's adjusted earnings per unit also deteriorated from the year-earlier adjusted figure of 47 cents per unit.

With regard to business units, the Southwest segment's operating income decreased 34.6% from the year-ago level to $73.2 million. The Northeast segment's operating profit of $31.6 million also fell 21.8% from last year's income of $40.4 million, affected by lower fractionated volumes.

For 2013, estimates were revised downward over the last 7 days, lowering the Zacks Consensus Estimate by 2.76% to $1.76 per unit.

Additionally, due to the volatile nature of the natural gas processing business, we do not see any significant price upside for MarkWest units in the next few quarters. We expect the partnership to grow at a somewhat more conservative and sustainable pace.

China 4G License Expected This Year

As per media reports, People's Republic of China – the biggest telecom market in the world by subscriber base, is expected to issue fourth generation (4G) license before the end of this year. A country wide 4G network will allow the Chinese people to get 5 times faster internet speed than 3G.

China has been lagging behind competing economic counterparts, especially USA, Europe and Japan in LTE (Long Term Evolution) deployment. USA has been the leader in LTE deployment, where almost every operator is expanding their LTE network. Japan and various developed countries in Europe are not lagging far behind, where most of the operators have started rolling out LTE networks.

This news comes on the back of a recent report from research firm IHS iSuppli, which predicts that 4G LTE will propel the next phase of growth in the Chinese telecom space. According to iSuppli, 4G customer bases will surge from an expected 1 million in 2013 to 439.9 million in 2017 with China Mobile Limited (NYSE: CHL) boasting of the biggest share of 52%, followed by China Unicom Limited (NYSE: CHU) with 26% and China Telecom Corp. (NYSE: CHA) with the remaining 22%.

The 3G technology in China hasn't received meaningful success yet. Till Jan 2013 only 247.2 million of its total 1.12 billion subscribers had 3G connections. Among the three carriers, China Mobile has the lowest 3G connections in China. Its home grown Time Division-Synchronous Code Division Multiple Access (TD-SCDMA) technology is partly responsible for the poor show, which is not very well supported by the handset makers including Apple Inc.'s (Nasdaq: AAPL) iPhone.

Chine Mobile, the world's largest carrier by subscriber base, has already started to deploy TD (Time Division) LTE technology and has already launched commercial LTE service on a trial basis in two cities. The company expects to offer LTE coverage in 100 Chinese cities by the end of the year.

Within Asia Pacific, South Korea has seen the greatest acceptability of LTE services because it has been able to back the latest technology with innovative smartphones that supports LTE. At the end of 2012, South Korea's largest carrier S K Telecom Co Ltd's total number of LTE subscribers exceeded 7 million, making up 26% of its total mobile subscriber base. The company expects that 60% of its total customer base will have LTE connections by the end of 2013.

We believe China's LTE success will depend on the country's ability to develop smartphones that support the super fast technology and the required investment in network infrastructure.

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