The re-org of China telecom/wireless industry started officially, with the China Mobile Group acqusision of China Railway Telecom (Teitong), a small fixed line operator. The news drove down the stock price of China Mobile (0941.HK, NYSE:CHL) sharply lower today. Many pundits, speculators and short term investors are worrying the golden (monopoly) days of China Mobile will be over soon.
Not quite. I think about this question hard: will China Mobile lose its competetive edge in the Chinese wireless arena, with the widely expected next steps of re-org? In the re-org China Unicom will sell CDMA networks to China Telecom, and combines with China Netcom, the smaller fixed line operator with a footprint in North China; China Telecom will enter into wireless business with the Unicom CDMA acqusition.
(China Mobile restoring wireless service in Sichuan earthquake region, more pics here)
My answer is No. Both China Unicom and Telecom will face integration challenges, and their networks are no where near the coverage of China Mobile, as evident by the aftermath of recent Sichuan earthquake. More importantly, marketing wise, China Mobile is still the leader with its three domestic brands: Shengzhou Xing, Quan Qiu Tone (GoTone) and Dong Gan Di Dai (mobile internet). It also launched an international brand named Zong. Management wise, I am pleased to hear Mr. Wang Jianzhou is still in charge. He was the architect of the growth of China Mobile in recent years.
Back to the stock, I agree CHL is not cheap even after the drop. But I would watch it closely, and pull the trigger when it falls into my comfortable price.
Appendix:
China Mobile home page (note China Mobile Limited is a subsidiary of China Mobile Group, similar goes to China Netcom, Telecom, and Unicom).
China Netcom home page. The home page puts its CEO Zhang Chun Jiang (who is appointed VP for China Mobile Group, maybe CEO heir apprent?), at front page at Sichuan earthquake rescue.
Hmm, this Zhang Chun Jiang guy seems more like a politician, I don’t think he is at Mr. Wang Jian Zhou’s league. I am glad Wang is still the CEO.
I remember Buffett/Lynch once said buy a business that “an idiot can run”. I will sell when an idiot take over CHL…