Wireless subscriber counts in China continued to grow in December. In a note to clients, Lehman Brothers' Lu Sun reports the following growth:
Sun explains the growth as resulting from year end promotions by both players in advance of the 3G race, and increased availability of low-end handsets. Sun recommends China Mobile as Lehman's top pick for the China Telecom industry:
It is the only telco that could fund a full-scale 3G rollout yet still sustain a dividend payout of 50%. In addition, we believe China Mobile's current "land grab" strategy should increase the barrier for new entry should China Telecom and China Netcom start to enter the wireless competitive landscape. We expect China Mobile to continue registering strong subscriber growth in 1H06, thanks to a series of marekting pushes and incessant handset prices declines. The "new year rally" has rendered China Telecom (CHA) and China Netcom (CN)to their fair value, in our view, while China Mobile should still offer 12% upside, followed by China Unicom's 7%.
Last week we wrote about China Mobile's apparent interest in acquiring Millicom as part of its "land grab" strategy