Piper Jaffray on China Mobile (CHL), implications for wireless service providers

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

Here are the key points:

  • Do not expect major
    policy changes from China Mobile (ticker: CHL).
  • CHL's biggest focus seems strengthening its service providers and creating more content for subscribers.
  • Piper believes CHL will
    continue to support service providers, and is unlikely to pressure them to
    cut back on marketing or take less revenue share.
  • Piper expects gradual changes that may have
    a short-term negative impact.

China Mobile's new management has taken an unprecedented interest in value added services:

  • Piper believes this is fueled by competitive reasons.
  • CHL is gearing up for 3G, and a
    new environment that will be more challenging than the
    current one where China Mobile is facing only one competitor, China Unicom (ticker: CHU).
  • Piper believes CHL is also determined to accelerate
    growth through data services, new
    content and products.

Which companies will gain most from China Mobile's support for wireless service providers?

  • Tom Online (ticker: TOMO). See its latest Q4 results here.
  • Hurray (ticker: HRAY). Latest news on HRAY from the China Stock Blog here.
  • Service providers with the closest relationships will have even more of an advantage
    than before.
  • Hurray
    already has a strong relationship with China Unicom (ticker: CHU).

Conclusion:

  • Possible near-term wireless weakness.
  • Long-term growth.
  • Piper recommends long-term investors increase wireless exposure in China.

More here from Piper Jaffray.

China Mobile stock market performance:

Chl321