The other half of China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU)’s revenue is derived from fixed-line and broadband services, although it’s not management’s main focus at the moment.
China Telecom: Dominant position in Southern China
Another strong competitor is China Telecom Corporation Limited (ADR) (NYSE:CHA), an integrated telecom service provider. It operates the largest wireline network in China and serves over half of China’s broadband access subscribers. The government controls over 70% of its shares.
China Telecom Corporation Limited (ADR) (NYSE:CHA) officially entered the wireless market after acquiring the CDMA business from China Unicom in 2008 and launched its 3G services a year later. Offering plans that bundle mobile service with fixed-line and broadband access, China Telecom Corporation Limited (ADR) (NYSE:CHA) has successfully converted a significant number of mobile subscribers from rival carriers. Investment in network infrastructure and marketing campaigns also played an important role in narrowing the gap with rivals.
For instance, although China Mobile and China Unicom enjoy better scale efficiency and stronger branding, China Telecom Corporation Limited (ADR) (NYSE:CHA) has managed to double its overall mobile market share to 14% over the past two years and gain control of a third of the 3G market.
China Telecom Corporation Limited (ADR) (NYSE:CHA) has a very important advantage in southern China: a monopoly in the fixed-line telephone and broadband markets. Its fixed-line network is so extensive that makes it almost impossible to duplicate. Although the fixed-line business now faces increasing competition from wireless services, its position in broadband access services remains unchallenged.
Bottom line
Although growth in the mobile market will be slower than the double-digit rates registered in previous years, there is still room for growth as penetration rate is 75%. I believe China Mobile is the most interesting choice and investors will be rewarded in the long run. Its unrivaled scale efficiency, strong brand recognition, and greater network coverage should ensure a continuous flow of funds and growth in profits over the years. Competition is rising, but China Mobile is keeping up.
The article The Great Potential of Telecom Operators in China originally appeared on Fool.com and is written by Damian Illia.
Damian Illia has no position in any stocks mentioned. The Motley Fool owns shares of China Mobile. Damian 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.
