Chinese Telecom Stocks Rally

Hong Kong-listed shares of fixed-line operators China Netcom and China Telecom jumped 11% and 8%, respectively, despite both firms reporting heavy declines in subscribers, following a media report saying the government will grant the telecoms 3G licenses "at an early date." Separately, shares of China Mobile rose 2%, as the company said it added a record 6.6 million new subscribers in October, increasing its total subscribership to 356.3M. China Unicom also reported an increase in subscribers, adding nearly 1.5M for a total of 117.1M. Its shares rose 3%. China Telecom said it lost 880,000 subscribers due to "intensified market competition, especially from mobile operators' free incoming call packages." The telecom now has 222.6M subscribers. China Netcom reported a decline of 370,000 subscribers to 114.1M. The fixed-line operators have increasingly struggled to drive subscriber growth because of wireless competition and particularly since fees on incoming wireless calls were dropped from the start of the new year. A Hong Kong-based Daiwa Institute of Research analyst commented, "Mobile substitution is the trend, and there's not much the fixed-line operators can do. Getting mobile licenses is the only solution." China Mobile's ADRs lost 5.1% to $81.80 on Monday and China Unicom fell 4.3% to $18.85, while China Netcom gained 2.8% to $54.00 and China Telecom rose 1.1% to $67.55.

Sources: Bloomberg, MarketWatch
Commentary: Chinese Tech Stock Weekly Summary • China Mobile, Netcom Delay Mainland IPO Until 2008 • China Mobile Beats Q3 Estimates on Strong Rural Growth
Stocks to watch: CHL, CN, CHA, CHU. ETFs: EEB, FNI, PGJ, ADRE, ADRA

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Fixed wireline operators will soon get a huge boost by a new entrant into the wireline telecom equipment sector, Rim Semiconductor (RSMI). Rim Semiconductor has developed a disruptive new DSL-like technology called Internet-Protocol Subscriber Line (ISPL) which delivers Telcordia confirmed data rates of 35 Mbps @ 8,000 kft. The company is set confirm IPSL spec. 1.0 in next months IPSL-SIG meeting in Milan, Italy. Learn more at their website rimsemi.com and ticktockstock.com.