China’s Mobile Sector Still Sizzling
Apple Inc. (AAPL) is a major player in China, with sales in the country accounting for about 20% of total sales in the first quarter and this is expected to rise.
The income demographics support the spending. In a recent research finding, Credit Suisse predicted that the household wealth in China will double to $35.0 trillion by around 2015, based on achieving sustainable GDP growth at or near the current levels. This will allow consumers to spend on more non-essential goods and services such as mobile phones. The country may be slowing, but it remains a top growth area, as I discussed in Why the Great Wall of China’s Still Standing.
The top mobile company in the country is China Mobile Limited (CHL). With a market cap of around $222 billion, the company is massive. For instance, by comparison, AT&T Inc. (T) is the largest mobile provider in the U.S. with a market cap of $193 billion and Verizon Communications Inc. (VZ) has a market cap of $114 billion.
China Mobile is one of the largest companies in the country and would rank high in the U.S. market. It is the market leader and can be considered a “widow” stock for long-term buy-and-hold investors. China Mobile is ranked the top brand in BusinessWeek’s “20 Best China Brands.” The stock pays an annual dividend of $2.03 for a current dividend yield of 3.7%, based on the prevailing stock price of $55.36 as of April 30.
The company had 667 million subscribers or 67% of all mobile users in China at the end of March. The company is the world’s largest provider of cellular services based on subscribers and has set its sights on expansion outside of the Great Wall.
China Mobile owns Bertrange-Luxembourg-based Millicom International Cellular S.A. (Pink Sheets/MIICF), a telecom operator with about 8.4 million subscribers and 17 mobile operations in 16 countries, including: El Salvador, Guatemala, and Honduras in Central America; Bolivia and Paraguay in South America; Chad, the Democratic Republic of Congo, Ghana, Mauritius, Senegal, Sierra Leone, and Tanzania in Africa; Pakistan and Sri Lanka in South Asia; and Cambodia and Laos in Southeast Asia.
Going forward, China Mobile will benefit from the massive mobile market and growth in the 3G and 4G telecommunications area.
You can also look at the makers of mobile accessories and builders of telecommunication networks in China. The reality is that the Chinese mobile market is massive and worth a look.