ANTICIPATION OF RESTRUCTURING MAKES TELECOM STOCKS FAVOURABLE
January 31, 2008 | BY
clpstaff &clp articles &Telecom carriers in the PRC are among the most favorable stocks to buy as investors are expecting to see the launching of 3G service and companies restructuring…
Telecom carriers in the PRC are among the most favorable stocks to buy as investors are expecting to see the launching of 3G service and companies restructuring this year.
Both China Unicom and China Mobile, for example, are considered to be good potential stocks to buy: while the former's share price, according to the Wall Street Journal, does not adequately value the networks it owns, the latter is benefited from the profusion of cash flow generation, according to a Merrill Lynch research report.
"We see China Mobile as having another 2-3 years (at least) of dominance over this fast growing market," the report said.
Meanwhile, 3G service may be delayed until after the Olympics events as the PRC is planning to adopt its own standards and technologies, both of which take time to develop.
"3G licensing has been speculated that they will be granted for the last couple of years. The main reason why it hasn't appeared ... is because China's technology isn't yet mature enough to launch the services," said Jodie Coutt, consultant of China Corporate Group.
In terms of restructuring, the adoption of wireless services are being taken up much faster than fixed-line services, Coutt said. "People are basically ignoring fixed-line and going straight to wireless, and in some rural areas, there is just no fixed-line, [and] they are just expanding the wireless services," she said.
One of the prevailing views on the imminent restructuring, Coutt said, is the merging of fixed-line operators with the mobile ones, so there would be three or more operators having both wireless and fixed-line networks.
On December 27 last year, the Minister of Information Industry Wang Xu-dong confirmed that the restructuring would start soon in 2008, according to the South China Morning Post. "We will actively push a restructuring plan as soon as possible next year so that telecoms operators can provide full-range services," Wang said to the South China Morning Post.
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