So what? China Mobile is serious about 4G
By investing around $6.7 billion to build 200,000 4G base stations to cover 344 Chinese cities this year, China Mobile continues to show its determination to build its 4G TD-LTE network. While China Mobile Ltd. (ADR) (NYSE:CHL) had been suffering with its 3G growth due to its isolated, handicapped TD technology, it will not make the same mistake this time. China Mobile will open up and take the leadership position for 4G this time. China Mobile is employing dual path technology strategy and will operate both TD-LTE and FDD-LTE network at the same time, as demonstrated in Hong Kong earlier.
As for the 4G TD-LTE phones, a new war is brewing. In late February, China Mobile Ltd. (ADR) (NYSE:CHL) announced several devices that are destined for its 4G market, including Huawei Ascend D2, HTC One, LG Optimus Vu II Plus, as well as ZTE U9810. Samsung Galaxy Note 2 with TD-LTE support is also rumored to be released by China Mobile in June.
Samsung, as the world’s number one smartphone provider, continues to expand rapidly globally and continues to enjoy its integrated manufacturing capabilities. Samsung is expected to work aggressively to establish and expand its market in China. On the other hand, Apple Inc. (NASDAQ:AAPL) will also be supporting China Mobile Ltd. (ADR) (NYSE:CHL)’s 4G TD-LTE and is rumored to release a new iPhone supporting TD-LTE standard by the end of this year. However, until China’s 4G license is officially given out, other major smartphone suppliers remain in the wait and see mode.
What now? Buy China Mobile now
Apple needs growth while China Mobile needs support for its TD-LTE network. Apple Inc. (NASDAQ:AAPL) was not there when China Mobile had a hard time developing its 3G network. This time, it is different as TD-LTE has been deployed by other countries, such as Softbank in Japan and Sprint Nextel and Clearwire in the United States. China Mobile is also working on the dual-band capability to support both TD-LTE and FDD (Frequency-Division Duplexing)-LTE.
The venture between Apple Inc. (NASDAQ:AAPL) and China Mobile will be a big positive catalyst for both companies in the near-term. Sooner or later, China Mobile will be the first to receive the 4G license from Chinese officials, then multiple years of revenue growth and margin expansion can be expected. Investors should not forget who owns the large majority stake in China Mobile, and it is absolutely unbearable for China Mobile to fail again with its 4G development after its embarrassing 3G failure.
Bottom line
With such huge CapEx in 2013, China Mobile Ltd. (ADR) (NYSE:CHL)’s share price will be under pressure. It is a great opportunity to accumulate China Mobile shares upon any pull back. China Mobile has more than sufficient resources to back up this 4G development, and its solid cash flow will further be improved once 4G market starts to expand. China Mobile is one of the best telecom investment targets for the next 5-10 years.
The article Investing in 4G TD-LTE? This Telecom Is Destined to Prevail originally appeared on Fool.com and is written by Nick Chiu.
Nick Chiu has a long position in China Mobile. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and China Mobile. Nick is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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