China Mobile Group got robbed

According to Chinese news, China Mobile’s ultimate parent, the China State Asset Management Co. (CSAM), took 50 billion Chinese Yuan (about 7.30 billion USD) from China Mobile Group (the parent of China Mobile Limited, NYSE: CHL; HKSE:0941), and gave it to China Telecom. For CSAM, this is merely put money from left pocket to right pocket, because both China Mobile and China Telecom are majority owned by CSAM. But for CHL shareholder like me, this is merely another highway robbery, orchestrated in the name of “balance of power in China telecom industry”.

China Telecom Revamp

Players: foreign investment bankers, Chinese goverment

The motivation of Foreign investment bankers: pump and dump, make money from the warrants (options) in Hongkong market.

Chinese goverment
Goverment usually does not know economy or business, just look at Bush admin you will know. In China goverment plays two roles in telecom revamp: as regulator and as majority owner. This makes the matter more complicated, and it seems to me goverment revamp effort is half-baked, also widely expected. It did not give big surprise to the market and the consumers.

Effectiveness of Chinese goverment policy in the past: telecom revamp in the past; regulatory effort on real estate (so far so failed). Of course we can not read the history book and do the investing. Otherwise all the greater investors will be history major.

Note: I wrote the above a while ago right after China offically started telecom re-org (May 23). I did write about the telecom re-org shortly after May 23, here are some.

New developments

Why China Mobile CHL is a buy: IV

Two important news about China wireless arena yesterday.

1) China Mobile finally started the long awaited trial of TD-SCDMA 3G network (read Chinese news story 1 , and 2 from XinhuaNet). Some features of 3G include the video conference/phone, TV program, etc.

2) The new (lower) roaming fees takes effect.

I think 2) may have slightly negative effect on CHL’s earning, while 1) is insignificant and we will not know the success of 3G/TD until 2009/10.

(Picture from XinhuaNet: people are lining up for 3G phones)

Valuation

Why China Mobile CHL is a buy: III

There were some big news in the US wireless arena last week. Verizon and AT&T won the auction of some new wireless spectrum, Google did not win the spectrum (see the details at NYTimes). Do you know how much Verizon paid for the new spectrum? $9.6 billion. Imagine a similar scenario in China, how much does the 3G license cost in China? As far as China Mobile (and China Unicom and Telecom) is concerned, it’s null, zero, no cost.

What? You must think this is crazy. How come the goverment gives away the license for free? Well, the No. 1 reason is the goverment is the biggest shareholder of all those big wireless/telecom companies. If they charge a big fee, essentially they are putting money from left pocket to right pocket. So why bother.

Moat analysis
What does CHL got?

(CEO Wang Jian Zhou at annual report, from iphonebuzz.com)

1) A top 10 Chinese global brand, which consists of 3 sub brands: GoTone/quan qiu tong (white collars), shen zhou xing (everyone) and dong gan di dai (mobile internet), quote in Chinese:

Why China Mobile CHL is a buy: II

As you may aware, terrible things happened in Lasha (China) a few days ago. It is reported 5 young girls who worked for an apparel shop were killed in the riot (in this particular case, arson set by the thugs). I noticed the last text message one of the girl sent to her father is: Don’t worry about me, dad. 最后一条短信：”不要担心我”. I certainly wish things would turn out differently for the girls. But on the bright side, I think her family at least got some pieces of their girl’s last moment. This reminds me of a related event. On September 11, 2001, some people who buried under world trader center tried to call their family members, or text messaging, and some got saved that way. I’m sure you have heard similar stories about cell phone saving people’s lives too.

So what’s my point? We are increasingly living in a mobile world nowadays. From business point of view, the enablers of this technology can make a fair share of profit, while providing reliable service to the consumers (hopefully mostly for entertainment, not life or death situation).

Year 2007 result
China Mobile (CHL) released its year 2007 results on March 19 (PDF file here). Here are the highlights:

Why I think China Mobile is a buy: I

First a bit background.

Re-org of China telecom industry
All the big players: China Mobile 中国移动 (CHL), China Netcom (CN), China Telecom 中国电信(CHA) and China Unicom 中国联通 (CHU), are majority owned by the state. In the widely anticipated re-org plan, the goverment will try to create more competition in wireless arena (right now CHL is much bigger than CHU); and save the fixed line operators, as CHA and Netcom are losing landline subscription to mobile phones. China Unicom, currently the smaller rival of China Mobile, will sell its CDMA network to China Telecom, and meanwhile CHU (with its GSM network) will merge with China Netcom.

Got some China Mobile

I decided to buy some China Mobile shares, after did some reading in the weekend. Today’s news is China Mobile walked away from Apple regarding iPhone, cool. Since I placed a limited order ($85.25) last night, I got it at $84.22 shortly after it started trading.

Two things: China Mobile (NYSE:CHL; HK:0941) is not cheap, at PE 33 and a market cap of about $340 b (Yahoo and Google Finance), it is the biggest mobile operator in the world. It has around 362 m subscribers (end of Nov 2007, according to its web site). Note the stock price has gone up 100% in 2007, and about 80% in 2006.

On the other hand, China Mobile is growing at around 20% top and bottom line. For a company of that size, it’s not easy. And one nice thing about it, it does not carry as much risk as other Chinese ADRs (say LFC, or PTR). This is important in current uncertain economy and market environment; and relevant for me after I suffered the paper loss from CROX and LFT. I believe people (especially young people) in China will use their mobile phone talk to their friends, text messaging, get to Internet…even if Chinese economy slows down after Olympics, as many people expected (which I don’t agree).