China expert calls on wireless

"As the world's largest wireless telephone company, with subscribers numbering more than 477 million, China Mobile is one of China's less volatile large cap stocks.

"The company reported profit growth of 5.2% for the first three months of the year, a rate that disappointed some analysts, leading to a mild decline from China Mobile's most recent peak price in the $48 range.

"The company remains attractively valued at approximately half of its 52-week high with a relatively low P/E multiple of 11.18. China Mobile's all-time high is over $100 perADR, and it's worth noting that the ?rm continues to add millions of subscribers every month.

"It's true that China Mobile is not growing as quickly as it used to because of the current economic slowdown.

"Also, increasing competition from firms like China Unicom takes a large slice of the market due to Beijing's reorganization of the telecom sector. The next big battlefront for China Mobile is the relatively new and ultrafast 3G wireless sector.

"By o?ering small laptops (netbooks) equipped with 3G chipsets at half price in its stores, China Mobile is aggressively carving out a niche in the relatively new and expensive arena.

"Currently China Mobile has only 500,000 3G subscribers, but the company aims to increase that number to 50 million within one year, a potentially mind boggling increase in revenues.

"For the most recent quarter, most of China Mobile's growth has been in relatively low revenue rural areas.

"If the company can make good on its 3G targets it should enjoy substantial profit increases and stock price appreciation. For long-term stock buyers, China Mobile offers an attractive dividend yield of 4%.

"China Unicom is in direct competition with China Mobile for wireless and 3G subscribers. Unicom has a slight advantage in the 3G arena because it o?ers an international platform for the high speed technology whereas China Mobile is obliged to offer a made-in-China technology.

"That means existing hardware available worldwide can be used on the China Unicom network. Although China Unicom is substantially smaller than China Mobile with approximately 130 million subscribers, the company is a good deal larger than its nearest rival.

"China Unicom is expected to gain new competitive advantages in the coming month by announcing agreement in prickly talks with Apple for access to the iPhone.

"China Mobile previously refused to give in to Apple's demands. China Unicom is also expected to reach agreement with China's most popular search engine, Baidu for advanced search technology on the company's network.

"China Unicom has a slightly lower dividend yield than China Mobile, returning a yield just over 2.7% annually to stockholders. It has a higher valuation because of its relatively impressive ability and room to grow in the enormous Chinese wireless market."

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