Bottom line: China Mobile’s strong profit growth shows the company has executed well on its 4G strategy, including strong promotion of data services that have rapidly become its single largest revenue source.
China Mobile notches strong Q2 profit growth
After a bumpy period over the last 2 years as it rolled out its new 4G network, leading wireless carrier China Mobile (HKEx: 941; NYSE: CHL) is finally reaping strong results from its efforts with some of the best profit growth I’ve seen in a long time. The company has just reported its interim results, which show that its profit jumped an impressive 9.2 percent in the second quarter, as it took advantage of its early entry to 4G to consolidate its place as the nation’s leading telco. Read Full Post…
Bottom line: GIC’s investment in China Telecom represents a vote of confidence in the company over the next 2 years, as it makes strong gains in 4G and data services and could become more aggressive under new leadership.
GIC bets on China Telecom
China’s smallest wireless carrier China Telecom(HKEx: 728; NYSE: CHA) has just received a vote of confidence from one of the world’s better-known global investors, with the new disclosure that Singaporean sovereign wealth fund GIC has purchased 5 percent of the telco’s Hong Kong-listed shares. That decision comes amid mixed signals coming from China Telecom, which has just received new leadership after its former chairman was booted out for corruption. On a more positive note, China Telecom has been posting strong growth in its year-old 4G business, though the foundation for that growth was largely laid by yet another previous leader who left the company about a year ago. Read Full Post…
Bottom line: Washington’s 2 month extension of a temporary license for ZTE to keep buying from its US suppliers indicates a final ruling is likely by year end in a similar probe against Huawei for illegally selling US products to Iran.
US extends export license for ZTE
After a tense period earlier this year when it appeared it could lose access to some of its key suppliers, telecoms equipment maker ZTE (HKEx: 763; Shenzhen: 000063) has been given continued access to those suppliers under a new extension of its earlier deal with Washington. The clash stemmed from a Washington ruling that ZTE sold US-manufactured telecoms equipment to Iran in violation of trade restrictions. Washington was set to punish ZTE by cutting it off from its many US suppliers, but later relented after the Chinese company agreed to cooperate with an investigation into the matter. Read Full Post…
Bottom line: China should abandon its model of trying to develop proprietary technology through government-backed initiatives, and focus instead on supporting leading private companies like Huawei to develop such products.
Qualcomm JV developing special server chip for China
China has started down a familiar but flawed path to creating its own cutting edge-technology, with reports last week that a joint venture backed by US telecoms giant Qualcomm (Nasdaq: QCOM) is developing a special microchip for the China market for use in computer servers that power the Internet. The effort looks strikingly similar to previous ones that typically saw China work with big foreign companies to develop technologies to compete with existing global products and standards. Read Full Post…
Bottom line: Beijing should take more aggressive steps to ensure true competition between China’s 3 telcos, to prevent collusion like their current resistance to ending domestic roaming fees.
China telcos resist end to roaming fees
The latest sign of collusion in China’s telecoms sector was in the headlines last week, as the nation’s big 3 carriers appeared to band together to counter new calls for an end to domestic roaming charges. A number of arguments were put forth for maintaining such fees, but the bottom line is that carrier costs of providing such service are negligible and the fees themselves remain an important revenue source.
The US market, which is most similar to China, eliminated such fees more than a decade ago due to competition between 4 major carriers that emerged in the 1990s. But China’s carriers, while competitive in some areas, appear to be acting together in anti-competitive fashion to resist the change, a common occurrence due to close ties between the companies. Read Full Post…
Bottom line: China Mobile’s latest results show that its business is starting to pick up after years of stagnation, which could provide some upside for its stock over the next 1-2 years as it steals share from its two smaller rivals.
China Mobile posts solid results
Profit growth of 0.5 percent may not sound like anything to boast about, but at least it’s growth and not contraction. That’s the message that telecoms giant China Mobile (HKEx: 941; NYSE: CHL) hopes to send with its latest results, which show the company returned to profit growth in the first quarter of this year after a sharp drop in last year’s fourth quarter.
China Mobile’s return to profit gains was fueled by strong revenue growth, as the company took advantage of its early entry to 4G and aggressive promotions to build up its customer base and steal market share from its 2 smaller rivals, China Unicom (HKEx: 763; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: 728). The trend certainly looks positive for China’s largest telco, since its profit growth is likely to accelerate now that the most aggressive spending on its new 4G network is in the past. Read Full Post…
Bottom line: ZTE will lose its appeal of tough US export sanctions for illegally selling high-tech equipment to Iran, as Washington sends a strong signal that companies engaging in such actions will face stiff punishment.
ZTE to appeal US sanctions
An increasingly frantic ZTE (HKEx: 763; Shenzhen: 000063) is working on several fronts in a bid to stop crippling US sanctions, after Washington determined the company illegally sold equipment to Iran. I used to be a strong supporter of compromise in China’s frequent trade conflicts with the west, and still believe that some form of compromise might be the best solution here.
But at the same time, the frequent tendency by Chinese companies to flout laws and agreements both at home and abroad shows that sometimes harsher measures are the only way to convince these firms to play by the rules. Accordingly, I do expect we could see Washington take a relatively tough stance against ZTE in this case, despite protests from Beijing and the potential for big disruption to the operations of one of China’s largest telecoms equipment makers. Read Full Post…
Bottom line: New signals that China’s 3 telcos are reducing their spending could presage a rumored consolidation of the trio into 2, with China Telecom and Unicom the most likely to be merged.
China telcos rope in spending
The latest sign of a potential shake-up in China’s stodgy telecoms sector came late last week, when global networking equipment giant Ericsson (Nasdaq: ERIC) attributed reorganization and weak spending by the nation’s big 3 carriers as a major factor behind its disappointing quarterly results. Despite expectation that China’s big 3 carriers would spend heavily on 4G this year, actual amounts so far have been relatively modest from the trio of China Mobile (HKEx: 941; NYSE: CHL), China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA).
The unexpected spending slowdown could be the latest sign that Beijing is planning an industry overhaul, following reports that first emerged last month of a possible consolidation of the 3 current mobile carriers into just 2. Such a move would reflect Beijing’s disappointment at the failure of China’s state-run carriers to become global innovators over the last decade, even after receiving monopoly rights over a market that has become the world’s largest for mobile and broadband services. Read Full Post…
Update: Since writing this post, China Telecom and Unicom have both announced that they will swap chairmen. Wang Xiaochu will resign from China Telecom and become head of Unicom, and Chang Xiaobing will resign from Unicom and become head of China Telecom. (Unicom announcement, China Telecom announcement)
Bottom line: A rumored shake-up in the top ranks of China’s big 3 telcos is long overdue, but will only be effective if Beijing installs experienced, marketing savvy managers rather than the usual government bureaucrats.
Leadership shuffle coming at big 3 telcos?
I was largely dismissive of the first reports to emerge last week of a brewing shake-up for the leadership at China’s big 3 telcos, saying the basis for the speculation didn’t seem too solid. But the chatter continued to gain momentum at the end of last week, leading me to change my view and predict that perhaps much-needed change is on the way and could be announced soon.
The buzz began when media first reported that the telecoms regulator had called a meeting last Friday of top leaders of China’s big 3 state-run telcos, China Mobile (HKEx: 941; NYSE: CHL), China Unicom (HKEx: 763; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA). (previous post) Now media are reporting that the Ministry of Industry and Information Technology (MIIT) has called another meeting for Monday, and some are citing unnamed sources saying that the main topic is a big leadership shuffle. Read Full Post…
Bottom line: Beijing should be commended for its recent program to open up telecoms services to private investment, and should consider accelerating the program and allowing in foreign participation.
Beijing injects competition into telecoms services
A campaign to bring private money into China’s telecoms sector was in the headlines twice over the last 2 weeks, reflecting a broader Beijing campaign to inject new life into traditional sectors like banking and energy that are now dominated by large and often slow-moving state-run firms.
One headline came late last week, when media reported that 20 million new phone numbers would be injected into a year-old program allowing private companies to sell mobile service. That followed even bigger news a week earlier, when media said the telecoms regulator hoped to allow private investors to build domestic telecoms network infrastructure for the first time. Read Full Post…
Bottom line: The new Nokia-Alcatel merger, combined with a continued low-key lobbying campaign by Huawei could ultimately convince Washington to ease its ban on Chinese telecoms equipment within the next year.
US to rethink Huawei ban?
A couple of new reports are casting a spotlight on the troubled relationship between Washington and leading Chinese telecoms equipment maker Huawei, and raising the intriguing potential for a much-needed compromise that might end the impasse between the pair. The impasse is really quite one-sided, with Washington banning the sale of all Chinese telecoms equipment in the US due to concerns about the potential for spying. But this kind of policy seems a bit broad, especially amid an accelerating sector consolidation that is leaving wireless carriers with fewer and fewer networking equipment suppliers to choose from. Read Full Post…
