Going up against Dave Mock on a wireless stock is no easy feat. Some of his pieces on China Mobile (NYSE:CHL) have been spot-on, and shareholders who paid attention have made some nice gains. But in light of some of the risks I mentioned in my Bear case, I still think it's a good idea to take money off the table with China Mobile.
Dave points out that China Mobile has posted a juicy 24.1% compound annual revenue growth rate for the past five years. Yet revenue has been moderating. For a company the size of China, it's only natural that the growth will succumb to the proverbial "law of larger numbers." There's also fierce competition from operators like China Unicom (NYSE:CHU).
I'm sure the management team at China Mobile realizes this. One sign is the recent talk about acquisitions. Back in January, China Mobile shelled out about $284 million for Pakistan's Paktel.
And what is the value of China Mobile's new customers? Keep in mind that a large proportion is coming from rural areas.
Despite this, Dave thinks there's a big opportunity to leverage the customer base with value-added services. While this would be nice, the fact remains that China Mobile has anemic ARPU rates.
Dave does show how carriers like AT&T (NYSE:T) and Verizon Wireless -- a joint venture between Verizon Communications (NYSE:VZ) and Vodafone (NYSE:VOD) -- have been minting some nice revenue from value-added services. Then again, it's taken significant infrastructure investments and marketing to get customer uptake.
So even with healthy growth rates in subscriber numbers, it looks like China Mobile's revenue will continue to lose some steam. And while 3G enhancements should help, it will still take several years to get any traction. In the meantime, investors are probably not going to see the kinds of growth rates they have been accustomed to, and that could mean some static for China Mobile's stock price.
Wait! You're not done with this Duel. Go back and read the other arguments, then vote for a winner.
China Mobile is a Global Gains selection. Vodafone is an Inside Value pick.
Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked No. 3,203 out of more than 60,000 players in CAPS. The Motley Fool has a disclosure policy.
