China Mobile Ltd. (ADR) (CHL), China Unicom (Hong Kong) Limited (ADR) (CHU): Chinese Mobile Poised for Growth

Both China Mobile Ltd. (ADR) (NYSE:CHL) and China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU) also have a huge opportunity with the roll out of 4G and the growth of smartphone usage in China. According to Michael Finneran,  principal at dBrn Associates, which is a full service advisory firm specializing in wireless and mobility, internet penetration is only 42.3% in China. The current investment in infrastructure is a building block for more of the profitable smartphone users in the future.  The licenses for 4G are set to be issued in 2013. While both China Mobile and China Unicom are state-owned and unlikely to be denied licenses, it remains to be seen which one will roll it out first, although it is likely to be China Mobile.

Expanding outside China

Both China Mobile Ltd. (ADR) (NYSE:CHL) and China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU) are expanding outside of China as well. The interesting thing is that both of these companies are expanding internationally in different ways. China Mobile has bough Paktel, a wireless communications company in Pakistan, while China Unicom has a large joint investment agreement with the Spanish telecom giant Telefonica, SA. China Mobile bought Paktel in 2007 and it has been increasing its market share in the Pakistani market since then. China Unicom first started its partnership with Telefonica in 2009 with a $1 billion cross-holding. The relationship between Telefonica and China Unicom was realized further when China Unicom bought a 4.56% stake in Telefonica worth an estimated $2.65 billion, while Telefonica owns about 5% of China Unicom, worth approximately $1.18 billion. Both China Mobile and China Unicom have a presence abroad, and this diversifies their risk in case of issues arising in the domestic market.

More growth ahead

While both China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU) and China Mobile Ltd. (ADR) (NYSE:CHL) have experienced some trouble this year, the future looks bright for both Chinese wireless communications companies. There are going to be costs in the short term while both China Mobile and China Unicom invest in their infrastructure. This is outweighed by the growth in the Chinese market and the fact that they are both expanding beyond the Chinese market. While both of them are competitors, despite the fact that they are both owned by the Chinese government, they both look like they are going to expand and grow in the future.

The article Chinese Mobile Poised for Growth originally appeared on Fool.com and is written by Jeremy Worthington.

Jeremy Worthington has no position in any stocks mentioned. The Motley Fool owns shares of China Mobile. Jeremy 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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