China Mobile returns to the present

China Mobile's shifting focus to the present with new handset and Internet initiatives is a positive sign as the company's new leaders try to put the company back on a growth track.

PUBLISHED : Thursday, 06 December, 2012, 12:02pm
UPDATED : Thursday, 06 December, 2012, 12:02pm

After months of maintaining a relatively low profile, China Mobile's (0941.HK; NYSE: CHL) recently named President Li Yue is finally making a splash in the headlines with some interesting strategic announcements that look like one of his first breaks with former longtime Chairman Wang Jianzhou. The two biggest new moves will see China Mobile develop its own brand of mobile phones, and also establish an Internet company. I personally don't find either of those two moves extremely exciting, though both could certainly have implications for many of China's smartphone makers and Internet companies.

Perhaps more significantly, this series of new initiatives indicates that Li and Xi Guohua, who took over as China Mobile's chairman earlier this year, will finally start taking some interesting new near-term steps to revive growth at the nation's dominant mobile carrier. That would contrast strongly with the recently retired Wang, who fixated on the company's 4G product that is still under development and largely ignored promotion of its current 3G service.

Let's take a closer look at these newest initiatives discussed by Li at a developers conference in the southern city of Guangzhou. According to media reports, Li said that China Mobile will develop its own brand of mobile phones, though he was also quick to add that those new phones wouldn't compete with models from handset makers like Huawei, ZTE (0763.HK; Shenzhen: 000063) and Lenovo (0992.HK).

A relatively youthful Li also said that China Mobile would set up its own Internet company in Guangdong province. There's not much detail about the new Internet company, and China Mobile already operates its own Internet portal that is the default homepage for people who surf the web using its 2G and 3G mobile networks.

So, what do these two new initiatives mean for both China Mobile and other mobile phone and Internet companies? This move into own-brand mobile phones is something that most US carriers have been doing for years now and is mostly aimed at brand building. The strategy is important at developing customer loyalty – something that is increasingly lacking in China's mobile market as many China Mobile users abandon the company for better 3G products offered by its two main rivals, China Telecom (0728.HK; NYSE: CHA) and China Unicom (0762.HK; NYSE: CHU).

This introduction of its own-brand handsets could perhaps create more customer loyalty, though I'm not completely convinced that it would have a major effect due to the bad reputation of China Mobile's 3G network, which is based on a homegrown technology. Perhaps the bigger impact could be felt by actual handset makers, most notably makers of lower-end products like ZTE and Lenovo that don't have strong brand loyalty among consumers.

Meantime, the Internet announcement appears to indicate that China Mobile intends to get more serious about offering an interesting online product to draw more people to its network. That kind of move could provide some interesting opportunities for top Internet companies like game operator Tencent (0700.HK) and e-commerce giant Alibaba, since China Mobile could partner with them to quickly make its new Internet product more attractive.

But as I said above, I'm most encouraged by the fact that Li is returning his focus to the present, where China Mobile has suffered from lack of leadership under Wang who was more focused on the future. If this kind of present-based focus continues, look for more interesting new initiatives to come from China Mobile under its new leaders. That could potentially help the company to regain some of the momentum it has lost to its more aggressive rivals over the last three years.

Bottom line: China Mobile's shifting focus to the present with new handset and Internet initiatives is a positive sign as the company's new leaders try to put the company back on a growth track.