Stocks That Still Have Some
Sizzle: China’s Mobile Sector
Thursday, June 16th, 2011
By George Leong, B.Comm. for Profit Confidential
China is growing exponentially in many areas. An area that is growing at an incredible rate is the mobile phone sector, where growth is enormous and there are currently more than 842 million users. Think about it. There are more mobile users in China than the population of the U.S., the European Union, and Canada combined!
Based on my economic analysis, these are exciting times for China’s mobile market, as the regulators, in an effort to increase competitive powers, are allowing three major carriers in China. The adoption of the next generation third-generational (3G) and fourth-generational (4G) networks will also help to drive additional growth in China’s mobile phone market, as there will be a need for new phones.
China will spend $40.0 billion over the next two years on its new 3G mobile communications networks, according to the Ministry of Industry and Information Technology.
The income demographics support the spending. In a recent research finding, Credit Suisse predicted that the household wealth in China will double to $35.0 trillion by around 2015 based on achieving sustainable GDP growth at or near the current levels. This will allow consumers to spend on more non-essential goods and services such as mobile phones.
A top mobile company in China is China Mobile Limited (NYSE/CHL). With a current market capitalization of around $180 billion, the company is massive. For instance, by comparison, AT&T Inc. (NYSE/T) is the largest mobile provider in the U.S. with a market cap of $182 million and Verizon Communications Inc. (NYSE/VZ) has a market cap of $101 billion.
China Mobile is one of the largest companies in China and would rank high in the U.S. market. It is the market leader and can be considered a “widow” stock for long-term buy-and-hold investors. China Mobile is ranked the top brand in BusinessWeek’s “20 Best China Brands.” The stock pays an annual dividend of $1.85, for a current yield of 4.1%, based on the prevailing stock price of $44.80.
The company has about 600 million subscribers—71% of all mobile users in China. The company is the world’s largest provider of cellular services based on subscribers and has set its sights on expansion outside of China.
Expansion outside of China has been a focus. China Mobile owns Bertrange-Luxembourg-based Millicom International Cellular S.A. (Pink Sheets/MIICF), a telecom operator with about 8.4 million subscribers and 17 mobile operations in 16 countries, including: El Salvador, Guatemala, and Honduras in Central America; Bolivia and Paraguay in South America; Chad, the Democratic Republic of Congo, Ghana, Mauritius, Senegal, Sierra Leone, and Tanzania in Africa; Pakistan and Sri Lanka in South Asia; and Cambodia and Laos in Southeast Asia.
Going forward, China Mobile will benefit from its 3G and 4G telecommunications technology license in China.
You can also look at the makers of mobile accessories and builders of telecommunication networks in China. As you can see, the Chinese mobile market is massive and worth a look.
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Tags: china, China Mobile Limited, chinese economy, economic analysis, Millicom International Cellular S.A, mobile phone sector, Stock Market Condition, Verizon Communications Inc
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George is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.
