Tag Archives: China Mobile

Everyone is looking closely at the latest results from China Unicom (HKEx: 762; NYSE: CHU) for signs that China’s second largest mobile carrier has finally put its house in order and can start to generate some excitement, after a dismal 2011 that saw it plagued by mismanagement issues. The results from last year reflect that turmoil, which saw the company fail to gain market share and post weak growth despite being given a big opportunity by the Chinese government to boost its position against its much bigger rival China Mobile (HKEx: 941; NYSE: CHL). Unicom reported its profit rose 14 percent for the year, while revenue was up 22 percent, both below market consensus, especially the profit figure. (English article; results announcement) In fact, the company should be posting much stronger growth as its numbers are coming off a relatively small base, and its 3G network is far superior to China Mobile’s for technological reasons. But the company has failed to capitalize on that technological advantage, with the result that its market share in 3G remained relatively steady in 2011, even as China Mobile’s share declined due to steady gains by the market’s smallest player, China Telecom (HKEx: 728; NYSE: CHA), which embarked on an aggressive marketing campaign for its own 3G network. Based on all the media reports last year, Unicom seemed to suffer from management turmoil throughout many of its major markets, as it tried to fill top positions and consistently underestimated handset demand for certain 3G models, resulting in shortages and lost sales opportunities. Among all the figures and discussion in the latest results, the most interesting seems to be Unicom’s disclosure that its margins will come under continued pressure this year due to high marketing costs, as it tries to improve its 3G network and sign up more subscribers through aggressive promotions including big handset subsidies. It said it expects its 3G business to become profitable during the year, with handset subsidies rising to about 18 percent of 3G revenue. (Chinese article) I’m not opposed to rising marketing costs, as these are largely a one-time spending item that can produce long-term revenue if Unicom can attract more new subscribers and convince them to use its service for years to come. But big spending doesn’t necessarily translate to big revenue gains, and I’m certainly not convinced that Unicom can improve its market position simply by spending more. The company’s past year of poor management is the current standard that the market expects from this company, and it desperately needs to show it can change that to make its new spending binge produce results. Otherwise, 2012 could become just another lost year for Unicom, with expenses rising but little or no growth on the top and bottom lines.

Bottom line: Unicom’s spending boost to build its 3G business in 2012 has less than a 50 percent chance unless the company can clear up its management problems.

Related postings 相关文章:

◙ New Developments, Including iPhone Deal, Heat Up 3G, 4G 中国电信iPhone销售和日益升温的3G、4G最新进展

◙ 2011: China Unicom’s Lost Year 中国联通失落的一年

◙ Sputtering Unicom’s Latest Excuse: Lack of Leadership

Two news tidbits out today on China Mobile (HKEx: 941; NYSE: CHL) nicely illustrate why investors are suddenly getting excited about this company after years of shunning its stock, highlighting big potential at its home market under an incoming generation of new top executives. The news also underscores the company’s largely failed global expansion policy, and why long-serving Chairman Wang Jianzhou needs to step down and let a younger generation of new leaders take over. The first news tidbit is some simple data from a government telecoms official saying China now has just 6 million households getting their Internet service over cable TV lines (English article) — a tiny figure compared with the 130 million households that get broadband over phone lines through service offered by China Mobile’s 2 rivals, China Telecom (HKEx: 728; NYSE: CHA) and China Unicom (HKEx: 762; NYSE: CHU). That number is significant because China Mobile is currently in talks to form a partnership with a new national cable TV operator being created through consolidation of China’s hundreds of regional cable TV companies — providing a serious new wire-based broadband competitor for Unicom and China Telecom. (previous post). That initiative, combined with recent strong signals that China Mobile will boost its 3G and 4G development, have excited investors who had largely lost interest in the company and its slow-growth story, sparking a rally that has pushed the stock to levels not seen since 2009. Meantime, the second news bit comes from Chairman Wang, whose exit has been long anticipated but never seems to come, speaking on the tired subject of global expansion. Under Wang’s leadership China Mobile has made several attempts at global expansion, failing in every instance except for one that saw it take over a small Pakistani carrier on the brink of bankruptcy. Now Wang has revealed that China Mobile is bidding for a 3G license for the Pakistani unit, and will also seek other global expansion opportunities with a focus on emerging markets. (English article) Does this strategy sound familiar to anyone? If it does, then that’s because Wang has been discussing such a strategy for the last 5 years even though he has no results to show for all his talk, except for the Pakistani unit that contributes little or nothing to China Mobile’s top or bottom lines. The bottom line for China Mobile in all of this is that the company should stay focused on opportunities in its domestic market for now, where it can achieve real returns for its investors, and stop thinking about overseas opportunities that offer much less potential and are harder to execute. Put differently, Wang needs to finally step down and hand over management of the company to the new leaders waiting to take over.

Bottom line: China Mobile could reap huge returns from domestic opportunities like cable TV consolidation and 4G, and shouldn’t waste its attention on overseas opportunities.

Related postings 相关文章:

◙ China Mobile Eyes New Nat’l Cable Network 中国移动有望携手中国广播电视网络公司

◙ Telecoms Infrastructure Prepares to Open 中国电信基建市场或更开放

◙ China Mobile Tries 4G Back Door in Shenzhen 中国移动试图绕过监管机构于深圳秘密规划4G网络

An increasingly confident China Telecom (HKEx: 728; NYSE: CHA), armed with a newly signed deal to sell Apple’s (Nasdaq: AAPL) wildly popular iPhones in China, is making some bold predictions about its growth this year, setting the stage for what could easily shape up as a bloody war for 3G subscribers. Chinese media are quoting an executive at the smallest of the nation’s 3 mobile carriers saying the company’s 3G subscriber base could surpass that of its older 2G base by the end of this year. (Chinese article) To me that goal sounds reasonable, admirable and something China Telecom should be aiming for — until I took a look at the numbers. According to its latest data for January, the company had just over 130 million total subscribers, with about 40 million of those using 3G and the remaining 90 million on its older 2G service. So if the 2G number were to remain completely unchanged for the rest of the year, China Telecom would have to add a hefty 50 million 3G subscribers this year to meet the executive’s forecast — a 35 percent increase to its current user base. That growth rate is actually roughly comparable to what China Telecom posted last year, when it began its aggressive campaign to add 3G users. But in terms of actual user numbers, the potential addition of 50 million or more this year would mark a sharp increase from the roughly 36 million subscribers China Telecom added in 2011. China Telecom steadily picked up 3G market share from its 2 larger rivals, China Mobile (HKEx: 941; NYSE: CHL) and China Unicom (HKEx: 762; NYSE: CHU) last year by aggressively courting consumers with a wide range of handsets, price plans and a solid network based on a globally used 3G standard. During that time its share of the market grew from just 19 percent at the start of 2011 to about 28 percent by the end of the year, as it took share away from Unicom and especially China Mobile, which didn’t strongly promote its 3G network based on an untested homegrown technology with numerous problems. China Telecom is clearly looking to focus its efforts in 2012 on 3G, based on the fact that nearly all of its new subscribers in December came from 3G, and all new subscribers in January were also 3G users. The company also made national headlines last week when it officially began selling a version of the iPhone 4S for its 3G network, capping months of talks with Apple in a deal that ended Unicom’s 3-year-old monopoly on iPhone sales in China. Initial sales for the iPhone on China Telecom’s network were reasonably strong, and I expect we’ll hear more about the company’s ambitious plans for both the iPhone and its broader 3G strategy when company executives talk to the media at their press conference on March 20 to discuss 2011 results and their 2012 outlook (earnings calendar). Given its aggressive marketing, solid technology and strong range of products, I wouldn’t be surprised at all to see executives reiterate a goal of adding 50 million 3G subscribers this year, leading to profit erosion in the short term but building a stronger long-term base for the company to pose a serious 3G alternative to its 2 bigger rivals.

Bottom line: Remarks by China Telecom indicate the company plans to turn up its aggressive 3G campaign this year, challenging its 2 rivals for dominance in the space.

Related postings 相关文章:

◙ China Mobile 3G: Where Are the Subscribers? 中国移动3G：订户在哪里？

◙ China Telecoms Faces Power Struggle, Half-Baked 4G 中国电信行业遭遇政府监管权利斗争

◙ China Mobile’s TD 3G Fading Fast 中国移动3G网络前景黯淡