Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

China Mobile Ltd. (ADR) (CHL): A Smart Choice for Investors

7 Reasons Why Investors Should be Afraid of ChinaIn the world, some leaders are unbeatable and China Mobile Ltd. (ADR) (NYSE:CHL) is among one of them. The company is facing stiff competition from its competitors especially in 3G market where it has lost a significant market share. It is investing in 4G technology which will surely strengthen it. Let’s take a look at other catalysts that will benefit the company in the future.

China Mobile Ltd. (ADR) (NYSE:CHL) is the leading telecom operator in China. It provides wireless and related services in Mainland China and Hong Kong. It is the largest telecom operator in terms of market capitalization. The Chinese government holds a 71% stake in the China Mobile.

Market share

The market share of the China Mobile Ltd. (ADR) (NYSE:CHL) is greater than the market share of its competitors. In February 2013, it held a 64% market share, down from 66% a year earlier. Its competitors China Telecom Corporation Limited (ADR) (NYSE:CHA). and China Unicom (Hong Kong) Limited (NYSE:CHU) hold a market share of 14% and 20%, respectively. The Chinese market has more than 1 billion subscribers and a penetration rate of 75%, lower than the emerging economies like Mexico and Brazil where the penetration rate is more than 80%. China Mobile is working on its high-speed fourth-generation service to recover the market share. China is capturing opportunities by expanding its network around the globe.


In the first quarter of 2013, China Mobile Ltd. (ADR) (NYSE:CHL) has reported a net income of 27.9 billion yuan ($35.8 billion), up from 27.8 billion yuan ($35.7 billion) year over year. Revenue rose 5.7% to 134.7 billion yuan ($173 billion) in the first quarter. EDITDA Margin (Earnings before interest tax dividend and amortization) decreased to 45.4% from 47.6% a year earlier while net profit margin slipped to 20.7% from 21.8%. The company might see a decrease in the profit this year because it is incurring cost for the 4G network. According to Bloomberg, the company’s full year profit is expected to fall 1.8% this year, but next year will be fruitful for the company.

Slipped in 3G Market

China Mobile has launched its 3G service in 2009. In the 3G Market, China Mobile Ltd. (ADR) (NYSE:CHL) has slipped in a race because of slow internet downloading speed. The company’s 3G market share was 63% in March 2013, down from 72% in 2009. Over the same period China Unicom (Hong Kong) Limited (NYSE:CHU)’s 3G share gained to 21% from 20% and the China Telecom Corporation Limited (ADR) (NYSE:CHA) expanded to 15% from 8% in the 3G market. The Reason behind China Mobile’s slow downloading speed is the use of TD-SCDMA technology which limits the speed to 2.8 Mbps.

China Unicom uses a WCDMA technology that provides a download speed of 21 Mbps while China Telecom offers a 3.1 Mbps speed nationwide and 9.3 Mbps in some parts of the country through its CDMA technology. By the start of 2014, it is expected that China Unicom (Hong Kong) Limited (NYSE:CHU) will provide an internet speed of 84 Mbps while China Mobile customers will benefit from 4G network. The decline in China Mobile Ltd. (ADR) (NYSE:CHL)’s 3G market share will be recovered by its 4G Technology in the future.

4G Technology

Ministry of Industry and Information Technology (MIIT) might issue 4G license by the end of this year. The MIIT has been planning to issue the license on priority basis to telecom operators possessing the TD – LTE technology and then to telecom operators with FDD LTE technology. The aim is to encourage telecom operators to adopt the TD-LTE technology.

After the announcement, China Telecom Corporation Limited (ADR) (NYSE:CHA) plans to adopt dual-mode FDD/TDD-LTE technology for its 4G deployment in China. China Telecom’s Chairman Wang Xiaoch elucidated that the dual mode will cover larger areas and expects to reach 200 million subscribers this year, up from 172 million at the end of April 2013. China Mobile is investing heavily in its 4G application network known as TD-LTE and intends to further increase the investment after receiving a 4G license this year.

Rising competition

Competition between China Mobile Ltd. (ADR) (NYSE:CHL) and its smaller competitors China Telecom Corporation Limited (ADR) (NYSE:CHA) and China Unicom is intensifying. China Unicom (Hong Kong) Limited (NYSE:CHU) is rapidly expanding its 3G market share but is still far behind China Mobile. China Unicom will expectantly snatch some 3G market share from the China Mobile due to slow connection speed. China Unicom (Hong Kong) Limited (NYSE:CHU) derives half of its revenue from a mobile service and the remaining half from fixed-line and broadband services. China Unicom uses an Internet access system based on a 4G technology called FDD-LTE. This technology is adopted by the U.S. and European telecom operators.

China Telecom is the third largest wireless operator in China. The market will definitely force China Telecom Corporation Limited (ADR) (NYSE:CHA) to offer a 4G service like China Mobile Ltd. (ADR) (NYSE:CHL), but China Telecom wants to expand its 3G Market share to recover the 100 billion yuan that it has invested in building the 3G Technology. It gained a significant market share in preceding two years.


The competition for China Mobile is increasing especially in the 3G market where both China Telecom Corporation Limited (ADR) (NYSE:CHA) and China Unicom (Hong Kong) Limited (NYSE:CHU) are progressing. Despite this, China Mobile has potential to grow and its early investment in the 4G Technology will surely be beneficial. I recommend investors to ‘buy’ this stock.

The article China Mobile: A Smart Choice for Investors originally appeared on and is written by Adnan Riaz.

Adnan Riaz has no position in any stocks mentioned. The Motley Fool owns shares of China Mobile Ltd. (ADR) (NYSE:CHL). Adnan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.