This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

China Mobile Shakes Off Europe's Funk

Stocks in this article: CHL

NEW YORK ( TheStreet) -- China Mobile (CHL) has fallen more than 4% from its yearly highs recorded last week as concerns about China's overall growth dented investor optimism surrounding the largest wireless carrier in the world.

Macroeconomic data on China for April that came out last week added fuel to the existing concerns that the country's economic growth was slowing. The quarterly data released earlier showed that China's GDP growth fell down to 8.1% a year in the first quarter of 2012, a sequential drop of 0.8%. Investors were anticipating a milder drop to 8.4%.

Much of the slowdown in China's growth rate stems from a drop in demand for its exports in key markets including the U.S. and Europe. The fact that China Mobile's growth is not dependent on exports but internal domestic consumption of its wireless services provides a better view of the company's prospects.

China Mobile is the world's largest wireless carrier, with close to 670 million subscribers, dwarfing its U.S. counterparts Verizon (VZ) and AT&T (T) more than six times. We have a $59 price estimate for China Mobile , about 10% ahead of the current market price.

See our full analysis for China Mobile's stock here.

Smartphone, 3G Demand to Support Growth

While the era of double-digit growth rates in the world's largest economy may be over, we expect the economy to still grow at a 7%-8% clip. Even the country's Five-Year Plan for 2011 to 2015 had called for an annual long-term GDP growth of 7%. At this rate, millions of Chinese will still enter the middle-class strata every year.

Greater disposable income will see demand for 3G-capable smartphones increase in the coming years. China is already poised to overtake the U.S. this year to become the world's largest smartphone market by volume, according to IDC's latest market figures. (See China Mobile Primed for $59 as China's Smartphone Market Blossoms .) Further, a low 3G penetration of only about 15% in China is a massive opportunity for China Mobile to promote 3G widely.

China Mobile's huge existing subscriber base is a big competitive advantage, in this regard. The carrier has over 600 million 2G subscribers that will eventually transition to 3G as mobile data services see a huge surge in demand over the coming years.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,814.94 -2.96 -0.02%
S&P 500 2,067.03 -2.38 -0.12%
NASDAQ 4,758.2520 +3.36 0.07%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs