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China Mobile: A Long-Term Buying Opportunity

Updated:2014/1/20 14:41

China Mobile (CHL) provides mobile telecommunications and related services primarily in Mainland China and Hong Kong. As of June 30, 2013, CHL's customers exceeded 740 million, making it the largest telecommunications company in the world. In addition, the company owns a 20% stake in Shanghai Pudong Development Bank and a 19.9% stake in Phoenix Satellite Television.

CHL's main competitors are China Unicom (CHU) and China Telecom (CHA), but the company also faces competition from internet companies that offer substitute products.

CHL is much larger than its two rivals, with revenues equal to CHU and CHA combined. Compared to its rivals, CHL enjoys scale efficiency, superior network coverage, and a well-known brand (Brandz 2013 ranked China Mobile as the most valuable brand in China). However, CHL has experienced some headwinds in recent years.

CHL's troubles began in 2009 when the company was mandated to build its 3G network based on TD-SCDMA technology, which is developed by China to avoid overdependence on foreign technology, while its competitors CHU and CHA were allowed to use the international standard. Since TD-SCDMA proved to be inferior, CHU and CHA each grabbed significant share of the 3G market.

Despite the disappointing result of TD-SCDMA technology, in my view, the Chinese government entrusting CHL to roll out its home-grown technology demonstrates the unique position of CHL compared to its smaller rivals.

 Source:seekingalpha
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