China Telecommunications Boom Investment Opportunities
Companies / Investing Feb 27, 2007 - 01:47 PM GMT
I recently found myself flying to Chandler, Arizona to meet up with a good friend of mine, David Phillips. Not only is David one of my very best friends, he's also a great person to talk to about estate planning. Heck, he wrote a whole book on the subject! Estate Planning Made Easy
I'm certainly not rich, but I will have some things to leave behind when I depart this world. So, I figured my trip would be the perfect way to talk business and catch up with my pal all at the same time.
The timing of my visit was perfect! Not only did I enjoy some very welcome Arizona sunshine, I also managed to catch David's 17-year-old daughter, Kelsey, performing with her church choir.
It may have been just a church choir performance, but it was the highlight of my trip. That's because Kelsey has the kind of rare, angelic voice that makes grown men cry. Of course, even her beautiful singing wasn't enough to keep the attention of the teens sitting near me.
Here's the interesting part: Instead of fidgeting with boredom or falling asleep like I did when I was a kid, dozens of these church-going kids were surreptitiously text messaging their friends.
And simple observations like this often lead to great investments …
The High-Tech Equivalent of Passing Notes to Your Friends
If, like me, you're hopelessly out of touch with the latest teenage fads, text messaging is the new, electronic way to pass notes in class. These days, teenagers do most of their talking not by phone, but by sending messages through personal computers and cell phones.
In my view, it's not an exaggeration to say that text messaging has become one of the most powerful technology and communication innovations that the world has ever seen.
In 2000, roughly 17 billion text messages were sent …
Last year, that number rose to 936 billion …
And by 2010, it's expected to hit two trillion!
That's a ton of text messages, and get this — the average cost of a text message is $0.10. Last year, mobile telephone operators pulled in $50 billion in revenues just from text messaging.
As an investor, those numbers should make your head spin. A billion times anything is a big mountain of money, and a trillion times anything is a staggering amount of money.
And let me tell you, the U.S. probably isn't even the biggest market for text messages …
Asians Are Maniacs When It Comes to Text Messaging!
Hang out at any train, restaurant, bus stop, or elevator in Asia, and here's what you'll see — people pecking out text messages on their cell phones.
Why aren't they just dialing instead? Well, in China, text messages cost an average of 1.3 cents to send. So, they're much cheaper than they are here in the U.S., and way more affordable than the typical cell phone call, which costs anywhere from four to six times as much.
You can see why text messaging is becoming as much a part of modern Asian life as chopsticks and rice. Let me give you a concrete example:
Beijing Mobile and Beijing Unicom reported that their customers sent more than 400 million popular New Year's greetings such as “Xin Nian Kuai Le” (“Happy New Year”) or “Gung Shi Fat Tsa” (“Congratulations and Get Rich”) text messages on just the very first day of the Chinese New Year. That works out to 5,800 text messages per second (and just in Beijing)!
Over the entire seven-day New Year holiday, China Mobile (NYSE: CHL) and China Unicom (NYSE: CHU) estimated that their customers sent 14 billion text messages, 11% more than last year's record of 12.6 billion. All told, Chinese cell phone operators expect to pull in $179 million in text messaging revenue from the holiday.
What I find most impressive is that these mega-sized figures are growing by leaps and bounds. The Ministry of Information Industry reported that 429.6 billion text messages were sent in China in 2006, a 41% increase from a year earlier. This year should see an even bigger rise. Why?
Because there will be more cell phones in operation:
- At the end of 2006, there were 460 million mobile phone subscribers in China, but that number is expected to hit 520 million this year.
- China Telecom added 252,000 subscribers in January, and now has 223 million subscribers.
- Last month, China Mobile signed up 4.86 million new customers, its largest single month of growth ever. It now has 306 million total subscribers — a bigger number than the entire population of the U.S.
What Investors Need to Know About the Wireless Industry
A lot of investors already know that the mobile phone business is one of the fastest growing industries in the world.
But many of these same investors are making a big mistake: They're only investigating U.S. stocks!
Sure, there are attractive mobile phone investments on U.S. exchanges — companies like Motorola, Nokia, Texas Instruments, and Ericsson.
However, the very fastest growing mobile phone companies (and all of my personal favorites) are based in Asia.
I don't mean to imply that the mobile phone business in Asia is not without peril. In fact, there are several Asian mobile phone players I wouldn't touch with a ten-foot pole.
However, a carefully selected portfolio of Asian wireless stocks has almost unlimited potential. After all, the worst performing wireless stock that I've recommended to my Asia Stock Alert subscribers has risen 25%. The best one has jumped a whopping 85% since I recommended it just eight months ago!
And while those numbers are very good, I expect my favorite Asian wireless stocks to at least double by the 2008 Beijing Olympics. By the 2010 Shanghai World Expo, I think they can quadruple!
So, please, pay attention to these kinds of trends … and look to foreign markets for some truly spectacular ways to play them.
Best wishes,
by Tony Sagami
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