Capitalism is thriving in China. Market data provider China Finance Online
This is a very big deal. China Telecom may be the country's leading old-school telephone connectivity provider, but it also watches over more than 40 million broadband customers and 10,000 business halls. With the new channel featured prominently on Vnet -- China Telecom's landing page for subscribers, as well as its subscriber services gateway -- both companies will be able to market China Finance Online's premium stock and market information.
Providing market information in a booming economy sounds like a can't-miss proposition. Reality has been more like an air ball. Xinhua Finance Media
The market's apathy is a surprise. Even if mainland trading has felt like the tulip-bulb frenzy revisited, it's hard to deny China's attractions. The economy is growing quickly. Margins are also wide for companies that can deliver content electronically, such as NetEase.com
Valuation fears? Are you kidding me? Analysts expect China Finance Online to earn $0.92 a share this year. That gives the stock an attractive forward earnings multiple in the teens. I don't like the fact that the company has failed to beat Wall Street's profit targets in each of the past three quarters, but mutually beneficial deals like this one will only help.
We also can't ignore China Telecom's role as an ambassador. Its base of 40 million broadband subscribers is just one-fifth of its wireline user base. As customers upgrade to broadband connectivity, its portal will become even more prominent in China.
The deal works. There will always be the threat of cheaper -- or even free -- providers of market data. Investors will have to live with that risk. It didn't get in the way of a company like Dow Jones being acquired at a pretty premium by News Corp.
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Longtime Fool contributor Rick Munarriz is a fan of China's growth story, but he does not own shares in any company mentioned here. He is also part of the Rule Breakers newsletter research team, seeking tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.