China Mobile Cheers Vendors

Network vendors worldwide will raise a glass to China Mobile (Hong Kong) Ltd. (NYSE: CHL) following the carrier’s decision to increase its capital expenditure this year by almost $1 billion.

In an impressive set of second quarter results the Hong Kong-listed arm of China Mobile Communications Corp. -- China’s largest wireless carrier -- announced plans to increase its full-year capital expenditure by 15 percent, from the $5.8 billion originally budgeted for the year (see China Mobile Ups H1 Profit).

The carrier now expects to spend approximately $6.7 billion for the full year 2004 in an effort to expand its GSM (Global System for Mobile communications) wireless data capacity.

“H1 spending totaled $2.7 billion, implying a 47 percent H2 on H1 rate of spending growth,” note analysts at Lehman Brothers. “We believe this increase in capex clearly improves the outlook for H2 spending globally relative to H1 and may ease some investor concerns that revenue trends may moderate materially going into the second half of this year.”

The Lehman siblings expect LM Ericsson (Nasdaq: ERICY) to be a major beneficiary of China Mobile’s bounty, with the Swedish vendor dominating “an estimated 35-40 percent share.” Other names in the fray include Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Motorola Inc. (NYSE: MOT), Nokia Corp. (NYSE: NOK), Nortel Networks Ltd. (NYSE/Toronto: NT), and Siemens AG (NYSE: SI; Frankfurt: SIE).

“We estimate that local vendors such as Huawei have a 5-7 percent market share,” adds Lehman Brothers.

— Justin Springham, Senior Editor, Europe, Unstrung

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