This Day On The Street
Continue to site right-arrow
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
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

'King Kong' China Mobile Running Out of Room for Growth

BEIJING (TheStreet) -- The gorilla at the top of the Chinese telecom mountain, China Mobile (CHL) fears no challengers. What it should fear is the future.

The company enjoys strong support from the Chinese government, its largest stakeholder. And China Mobile's main rival, China Unicom (CHU), is only a monkey on the mountainside with 37% as many subscribers, and less than half the revenue and one-eighth the net income that China Mobile reported for the first quarter.

China Mobile is the world's most popular cellular carrier, with 787 million subscriptions as of May. Almost everyone in China old or young enough to swipe a screen carries at least one device equipped with a China Mobile SIM card.

But the gorilla may be running out of room for future growth. China's economy is cooling, and consumer prices are rising for non-discretionary items such as food. A new value-added tax on telecom services that took effect June 1 is likely to bite into telecom profits. And free, Internet-based voice and messaging services are undermining traditional telecom revenue sources.

Moreover, mobile Wifi plans offered by China Unicom and third-place carrier China Telecom (CHA - Get Report) are giving the country's urban consumers plenty of choices.

Everbright Securities has rated China Unicom's stock a buy, given the company's 74% year-over-year increase in first-quarter net earnings to 1.1 billion yuan. The report cited strong sales of China Unicom's broadband Internet services and expectations that the company may spin off assets as the Chinese government opens more state companies to private investment.

China Mobile is actively seeking growth. It's building a faster, 4G Wi-Fi network that will accommodate the free voice and messaging services used daily across China, such as Hong Kong-listed Tencent's (TCEHY) WeChat and QQ. The 4G network, which will cost an estimated $39 billion, will cover about 340 cities. A 5G network is being planned.

Moreover, China Mobile is cooperating with 17 wholesale Wi-Fi marketing companies, called mobile virtual network operators, such as Alibaba's (ALBIY) Ali Telecom. Alibaba is an e-commerce concern with an IPO pending in New York.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!
CHA $65.57 1.60%
CHL $67.78 -1.20%
AAPL $129.83 -0.45%
FB $79.62 -0.99%
GOOG $562.92 1.30%


DOW 18,189.13 -25.29 -0.14%
S&P 500 2,112.13 +1.39 0.07%
NASDAQ 4,986.8380 -1.0520 -0.02%

Partners Compare Online Brokers

Free Reports

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