China's mobile market took a big step last week when the government approved the rollout of China's first 4G network for commercial purposes. It's now just a matter of time before the well-to-do Chinese consumers can enjoy the benefits of faster mobile connectivity.
There will naturally be some big winners cashing in on the upgrade from 3G. Let's take a look at some of the likely beneficiaries.
China Mobile (NYSE: CHL )
Naturally, wireless carriers will be big long-term winners as folks pay up for faster connections, but no one will benefit like China Mobile. It is easily the biggest player, with 759.3 million customers as of the end of October. The opportunity here is that just 176 million of those wireless subscribers are on 3G. More than three-quarters of China Mobile's are on older feature phones.
That won't necessarily change with 4G, especially if wireless providers charge more for the data plans where consumers will likely go through more bandwidth. However, as China's economy continues to grow faster than most countries, there will be more accounts able to upgrade to smartphones.
Youku Tudou (NYSE: YOKU )
The Chinese leader in video streaming hit a new 52-week high last week on the 4G news, and that makes sense. China is already consuming a lot of streaming video, and that's going to go up as the experience becomes easier with faster 4G speeds.
Youku Tudou revealed last week that its mobile traffic has surged to 300 million daily video views, and naturally that's only going to continue to grow. Revenue is on a tear, and analysts see its top line soaring by better than 40% next year. Youku Tudou is still losing money, but Wall Street expects that to change next year.
Baidu (NASDAQ: BIDU )
China's leading search engine is also no slouch in video. Its iQiyi platform was augmented earlier this year when Baidu shelled out $370 million to acquire streaming rival PPS. Youku Tudou is still the top dog in streaming, but Baidu isn't too far away.
Until recently, investors were concerned that Baidu didn't have enough skin in mobile. Its search engine has cornered the market in desktop usage, but Baidu wasn't as strong on smartphones and tablets. The combination of iQiyi and PPS definitely help, but so did Baidu's deal this summer to snap up the leading mobile apps marketplace operator. Now Baidu is in a great position to benefit from the 4G revolution as consumers stream video and download applications.
Sohu.com (NASDAQ: SOHU )
One of China's longest trading Internet stocks, Sohu has been public on a stateside exchange for more than 13 years. As a leading online portal, Sohu does a bit of everything. It, too, has a fast-growing video platform that will benefit from the faster speeds of 4G. Just last week it struck a deal to bring Nickelodeon's SpongeBob SquarePants, Teenage Mutant Ninja Turtles, and other animated content to China.
Another area where Sohu is proficient is online gaming, accounting for 44% of its revenue in its latest quarter. Most of China's providers of online diversions make sure that their games can play on slower connections, but the 4G revolution should raise the bar in terms of improving the gameplay as well as increasing the number of potential players.
There's a lot of winners in China's mobile expansion, and tech and telecom stocks are definitely poised to benefit.
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