No doubt about it -- China's dominant wireless service provider has been on a tear lately. Investors in the ADRs of China Mobile
As penetration rates climb in the nation of 1.3 billion, though, investors should consider how China Mobile can adapt as subscriber growth eventually slows and as the government meddles in the market. Global operators Vodafone
As the Chinese market matures, one area to watch is China Mobile's rising churn rate.
2004 |
2005 |
2006 |
|
---|---|---|---|
Churn |
1.3% |
1.9% |
2.7% |
Subscribers (in millions) |
204.3 |
246.7 |
301.2 |
While this trend is clearly negative and well above the 1.1% of Verizon Wireless (a joint venture between Vodafone and Verizon Communications
Another significant obstacle to China Mobile's future growth lies in government regulation of the communications industry. Since the Ministry of Information Industry (MII) exerts significant influence on tariffs and network expansion, China Mobile is subject to the designs that the Chinese government has in developing the industry.
For instance, the MII has permitted competing carrier China Unicom
So, while there's plenty of untapped growth left in subscribers and enhanced mobile services in China, the competitive landscape is changing rapidly. Time will tell how well China Mobile can adapt and keep the growth alive.
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Fool contributor Dave Mock is considering launching his own Chinese mobile service and figures he only needs to capture 0.0001% of the market. He owns no shares of companies mentioned here. Vodafone is an Inside Value recommendation. France Telecom is an Income Investor recommendation. Dave is the author of The Qualcomm Equation. The Fool's disclosure policy offers lifetime subscriptions for free.