Usually when thinking of telecommunications companies, AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) are the first firms to come to mind. Sure, there’s also MetroPCS Communications Inc (NYSE:PCS) and Sprint Nextel Corporation (NYSE:S) , but AT&T and Verizon are the dominant duopoly in the business. When I think of telecoms, I also think yield. In a yield starved environment, AT&T and Verizon, offering yields of around 5.1% and 4.6% respectively, can provide investors with a source of generating income. Metro and Sprint- not so much. Neither of the aforementioned offers a dividend payout. Sprint looks more like a spec play at this point, and MetroPCS Communications Inc (NYSE:PCS) without yield isn’t offering much in the income-generation category. AT&T and Verizon are also starting to look pricey, with both trading near their 52-week highs. Investors, however, also have another option to fill the telecom void in their portfolio if they look abroad for alternatives.
Not too hot, not too cold…
China Mobile Ltd. (ADR) (NYSE:CHL) may be the telecommunications firm to save the day. The firm may not be too hot as far as yield goes (its dividend yield of around 3.4% is inferior to the yields of the U.S. duopoly of AT&T and Verizon), but it isn’t as cold as Sprint or PCS either- and seems to be in far better shape financially than all four mentioned American firms when comparing debt to equity ratios. Not to mention that the Chinese carrier is also the world’s largest carrier by subscribers. China Mobile is also attractively valued, being priced at around only 11 times earnings- a discount to its large U.S. counterparts AT&T Inc. (NYSE:T) and Verizon (the smaller Metro PCS currently trades at a P/E of around 8, with a forward P/E of around 13. Sprint is currently plagued by negative earnings per share, and thus has no P/E ratio). We are looking at a company with over $200 billion in market cap here, so they are definitely a force to be reckoned with, and also have the growing Chinese consumer base on their side.
But wait a minute…they don’t have the iPhone?
You would think not having the iphone would be an issue for consumers, but apparently not. China Mobile Ltd. (ADR) (NYSE:CHL) recently reported its best-ever monthly 3G uptake numbers, “adding 5.5 million net 3G subscribers in December as against an average of about 3 million in the previous months,” according to Forbes. This comes at a time when the iphone 5 was released on two competing carriers who saw only around 3 million new subscribers each. Apple Inc. (NASDAQ:AAPL) needs China and emerging markets for future growth, and is still doing well on other carriers such as China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU) and China Telecom Corporation Limited (ADR) (NYSE:CHA), but ceding smartphone sales to Nokia Corporation (ADR) (NYSE:NOK) and Android to the world’s largest carrier isn’t something to be thrilled about. While Apple may eventually work out a deal with the company, China Mobile seems to hold the upper hand.