China Mobile Ltd. (ADR) (NYSE:CHL)

JrIIIx (< 20) Submitted: 4/14/2008 4:43:05 PM : Start Price: $74.05 CHL Score: +39.73

Heh heh, I'm really going against the grain on this one but I live in China so I'll put in my two cents. Mobile is a not a bad stock to own, but I don't think its quite as golden as everybody seems to think.

1. So-so service, High price.

There is no denying that China Mobile is the carrier of choice in China over China Unicom right now. Most of my friends use it and so do I, and this in spite of the fact that China Unicom is cheaper...a good deal cheaper. So why do people pay more more money? Out of vague sense that they're getting a better product, something Chinese people care more and more about.

Except, that its mostly hype. Though China Mobile does offer better reception in the Chinese countryside, the reception in all ciites is pretty much the same. Given that the trend in China is DEFINITELYtoward cities and away from rural areas, and that most of the middle class people that are using this service are urbanites and not poor farmers, I expect the perception of "better quality" to give way to reality sometime in the future. And especially since China Mobile's reception is often less than satisfactory in my city anyway, I'm gonna go ahead and switch and save some money real soon. Did I mention there are no penalties for switching and that China Unicom is cheaper...a lot cheaper?

2. Government Influence

China Mobile has definitely benefitted from being in communist country where the government owns most of the big industries still and barriers to entry are high. I think they had any real competition they'd be in a bit of trouble. However, the government has expressed that it would prefer for there to be more balance in the mobile industry. What the goverment wants, the governmemt usually gets, and whether it comes from bringing China Telecom into the mix, creating a merger to bulk up Unicom or whatever, I think rumors will at some point become reality and the government will take further steps to level the playing field.

Even with all this, CHL will probably be alright. But even though its in China and the market is huge, its hard for me to give a thumbs up to a company that overcharges for so-so service and outdated technology, but suceeds because people don't have access to much else. That my take on it.

But as I'll be switching soon, I'm somewhat biased=)