Bloomberg News

China Mobile Adds to 2012 Gains on 4G Expansion: China Overnight

March 15, 2012

China Mobile Ltd. (CHL), the world’s biggest phone company by subscribers, extended the best performance among Chinese phone companies in the U.S. this year as it builds out a faster wireless network to lure subscribers.

The Hong Kong-based carrier that’s gained 12 percent in 2012 rose 0.4 percent yesterday to $54.24 in New York. The Bloomberg China-US 55 Index (CH55BN) of the most-traded Chinese companies in the U.S. rose 0.6 percent to 104.85, led by New Oriental Education & Technology Group Inc. (EDU), China’s largest private education service provider.

China Mobile is expanding its so-called fourth-generation wireless network in a bid to attract customers who use higher- end phones to watch videos and play games. Chairman Wang Jianzhou said at a press conference in Hong Kong yesterday that China Mobile will expand its 4G coverage to nine cities from six last year. The company’s 3G network uses a technology that’s incompatible with popular smartphones including Apple Inc.’s iPhone, which is offered by its main rivals.

“There’s been some growing optimism around China Mobile’s opportunities in 4G,” Steve Clement, an analyst at Pacific Crest Securities Inc. in Portland, Oregon, said yesterday by phone. China Mobile hasn’t “had as good a network or handset selection relative to their competitors. The hope is the sooner they can move to 4G, the better for them.”

China Mobile has out-gained competitors as investors favor its reliable revenue and dividend, Clement said.

Net Income Increase

China Unicom (Hong Kong) Ltd. (CHU), the nation’s second-largest carrier and first to offer the iPhone with a service contract, rose 2 percent to $18.10 yesterday, paring its 2012 decline to 14 percent. China Telecom Corp. (CHA), the third-largest carrier, began sales of the iPhone on March 9. The stock gained 1.5 percent to $58.85 yesterday and has risen 3 percent this year in New York.

China Mobile’s fourth-quarter net income rose 4.6 percent to 33.9 billion yuan ($5.4 billion) on 144.2 billion yuan of sales, the company said yesterday. Profit narrowly missed the 34.2 billion yuan median estimate of six analysts in a Bloomberg survey.

“That company is just an absolute juggernaut,” Kevin Carter, co-founder and chief executive officer at Baochuan Capital Management LLC., said by phone from Walnut Creek, California. “When they do get a proper iPhone, it’ll be a 4G phone and those data-intense users are what the phone companies are looking for.”

Hong Kong Premium

China Mobile’s Hong Kong shares gained 0.5 percent to HK$84.65, or $10.91, the first advance in three days to trade 0.5 percent above the company’s American depositary receipts. Each ADR is worth five ordinary shares. China Unicom rose 0.7 percent in Hong Kong to HK$13.98 and China Telecom also added 0.7 percent to HK$4.55.

The Hang Seng China Enterprises Index (HSCEI) of mainland shares traded in Hong Kong fell for a third day this week, losing 0.5 percent to 11,240.57. The Shanghai Composite Index (SHCOMP) declined 0.7 percent to 2,373.77 yesterday.

Foreign direct investment in China fell 0.9 percent last month, the fourth straight decline as companies reined in spending amid a slowdown in the world’s second-biggest economy and the European debt crisis.

Premier Wen Jiabao announced on March 5 an economic growth target of 7.5 percent for this year, down from 8 percent over the past seven years.

‘In a Hard Landing’

“If you look at the Chinese data, you should stop debating about a hard landing,” Adrian Mowat, JPMorgan Chase & Co.’s chief Asian and emerging-market strategist, said at a conference in Singapore on March 14. “China is in a hard landing. Car sales are down, cement production is down, steel production is down, construction stocks are down. It’s not a debate anymore, it’s a fact.”

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose 0.5 percent to $38.86 yesterday, climbing for the second day this week.

Beijing-based New Oriental jumped 7.1 percent to $27.89 yesterday, the first advance in five days.

CNinsure Inc. (CISG), a Chinese insurance agency and brokerage, fell 3.2 percent to $6.93 in New York, the biggest decliner on the Bloomberg China-US 55 Index.

China will allow exchange-traded funds of Hong Kong shares to list on mainland exchanges “soon,” K.C. Chan, Hong Kong’s Secretary for Financial Services and the Treasury, said in an interview in New York yesterday.

The process of getting Hong Kong stocks to trade on the Shanghai and Shenzhen exchanges as ETFs is “almost near completion,” Chan said. “The final step would be for the regulators in China” to review companies’ applications to start the funds.

To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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