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.
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:
Financial Times did a Top 10 Chinese global brands survey recently. And here are the winners. Did you notice anything interesting?
I noticed BoC, Air China, China Mobile, China Telecom, Sinopec, CCB are state owned (majority owned); while Lenovo, Tsingtao beer, Haier and Baidu are public companies. I am a little puzzeled why ICBC and PetroChina did not make it to the list; and I was NOT surprised Baidu tops Sina, Sohu and Netease.
By the way, many of the top 10 brands are Beijing Olympics sponsor, such as BoC, Air China, China Mobile and Lenovo. If you watch NBA on TV, you will see Lenovo and Haier ad. from time to time.
(Full size pic is here).
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:
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.
Missing iPhones are found in China
According to InStat, a market research company, there are about 400,000 unlocked iPhone in China. Most of them are purchased in the US, unlocked and shipped to China later. An interesting side point is Chinese (smart phone) users are mostly for entertainment, while the US users focus on business functionality (email, etc., one reason Blackberry was so successful). Chinese translation from Xinhua:
I closed the Amazon Feb $65 puts last Wed, when I saw the stock dropped to around $68, which is the low point the day after it released Q4 earning.
1) short/put a stock is much harder than I thought. I started this trade because I saw EDU, AAPL, and VMW all dropped big after missing earning. But I have hind-sight bias on them: things are always clearer on rear view mirror. I did not know EDU will issue a so-so guidance for this Q; I did not know iPod suddenly stopped growth, iPhone did not sell as fast as Steve wanted, and Mac computers are expensive considering consumer slow down.
I started pay attention to the mobile phone and service providers lately. In fact I bought some China Mobile (CHL) shares about 2 weeks ago (bought it a bit early again
Nokia: the balance
Nokia is the No. 1 brand in China as shown in baidu Shouji (cell phone) report. One thing I noticed during my last visit to Shanghai is Nokia set up a service center near Zhongshan park. Being in Midwest USA, I have not seen things like that and was a bit surprised. Why Nokia pay the extra attention to the customer services, now that they are already No. 1? One reason, I can think of, is they want to make sure their customers can get better services from authorized places, rather than going to those blackmarket and get their phones fixed.
(Update) Halter US China Index closed down 7.89% and FXI down 7.55%. China Mobile (CHL), a major component of both index, is down 7.79% today.
FXI (FTSE Xinhua 25) dropped 7.23% as of now 11:27 AM US CST.
Halter US China Index (web site), which is more broad based Chinese ADRs traded in the US (although PetroChina, China Mobile has a bigger weight), dropped 7%.
And last but not least, trader818 China ADR index, dropped 8.4%.
Sounds a lot like the Feb 28, 2007, except the bear comes early this year. Although the general US market also dropped a lot, this Chinese drop seems a bit excessive. I unloaded some LFT today (yes I decided to take the bite, rather than hanging there dead). I think going forward small cap Chinese ADRs, especially newly listed IPOs, will perform wose than the large cap ones. Just like the “2-8” and “8-2” phenomena in China domestic market, when things are uncertain, stay with the big guys
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).