What is JP Morgan's top Chinese telecom pick for 2005?

Includes: CHA, CHL, CHU, CN-OLD
by: Ezra Marbach

JPMorgan Chase (ticker: JPM) Hong Kong analyst Tim Storey likes China wireless operator China Mobile (ticker: CHL). Here's why and a quick thought:

Possible upside from industry rationalization

....we believe the Chinese government is looking at several areas to improve the fundamental outlook for the wireless market in China, namely through limiting irrational competitive behavior and potentially reducing the number of wireless operators through consolidation.

Quick thought: Along with "industry rationalization" mentioned above, JPMorgan expects China Mobile to receive one of the four government-issued 3G licenses this year - all of which leads JPMorgan to predict a 30% upside to the company's stock. The report is dated February 24, 2005. The stock closed at HK$25.10, or US$16.09 in the United States. So 30% upside would be a target of approximately US$20.92.

Last week's strong results show China Mobile thriving. But issues remain. Growth is slowing, competition is fierce, and new opportunities are slim. While China Mobile is seeking growth in rural areas, and is vying for a stake in Pakistan's largest telecom operator that would give them an international presence and potentially new expansion opportunities, the future is unclear. And if fixed-line operators are granted mobile licenses, investors could be in for a bumpy ride.

China Mobile's stock market performance: