Time to buy

Blood on the streets

Buy when there is blood on the streets is a piece of Wall Street wisdom often attributed to Philippe de Rothschild (1902 — 1988), who was rich enough to have cash to throw around when everyone else was bleeding.

Wang Jianzhou, chief executive of China Mobile, clearly understands the logic of the saying.

With 350 million customers and the lion’s share of a duopoly in its home country, China Mobile is going to have deep pockets no matter what happens to the global economy. The Daily Telegraph quoted Mr Wang speaking at the World Economic Forum at Davos a few days ago:

The chief executive of China Mobile, the world’s largest network by customer numbers, expects a continued ­correction in global equity markets to enable him to seal a string of international take­over deals.

Wang Jianzhou, who ranks among China’s most prominent members of the international business community, said he hoped falling share prices would represent an opportunity to buy smaller counterparts in other Asian markets.

I hope the falling valuations of companies will allow us to do more deals, said Mr Wang, who was among a clutch of Chinese executives attending last week’s World Economic Forum in Davos. We are very much focused on the emerging markets.

To date, China Mobile has made just one overseas acquisition, the $284m (£143m) purchase of a controlling stake in Paktel, the Pakistani telecoms company, last year.

Since then, Mr Wang had complained that soaring valuations of assets were acting as a deterrent to potential deals.

Mobile telephony is a business that works everywhere from the Congo to Cambodia. It’s about the only business that works reliably in war zones. Mobile communications are a service that even the poorest of the planet’s poor have a real demand for.

It is likely that China Mobile, like many other Chinese companies, will use a downturn in the world economy to spend some of the cash they have been saving for the last 25 years. They will buy good cheap assets in the developed world, but also in countries where Wall Street has not got the balls to go.

If there is not a U.S. or global recession in 2008 and acquisitions remain expensive, the gargantuan Chinese mobile carrier can wait it out. As the headline of a Netease story about Mr Wang’s speech in Davos says: China Mobile will very patiently seek out acquisition targets abroad (link — in Chinese).

While the Telegraph article cited above talks of ‘emerging’ markets, the Chinese report on Netease calls them xinxing shichang (新兴市场) or ‘newly prosperous’ markets. The character xing (兴 or 興 in traditional characters) means to prosper, to thrive, to become popular or fashionable. The character xing is also part of words that mean a variety of good things such ‘excited’, ‘start construction’, ‘brisk business’, and — get this — ‘happy’.

Contrast that with ‘emerging’ markets:

Monsters ‘emerge’ from swamps. Psycho killers and rapists ‘emerge’ from the darkness. ‘Emerging’ markets sound risky. ‘Newly prosperous’ markets sound like you can make a boatload of money if only you get there fast enough.

This topic is examined by the China Vortex blog in a recent post titled Risk is in the eye of the beholder. Excerpt (emphasis added):

Viewing the local African population as customers is one area where Chinese view Africa fundamentally differently from the West. While Beijing, Shanghai and the Chinese tier one and tier two cities are relatively modern, it is very easy to forget that when it comes to pervasive poverty, China is only 10-20 years removed from the levels of African poverty. Basically, Chinese companies know how to sell to poor people because they had lots of practice in China.

Blinkers on the media

The themes above are a crucial part of the China story that should have been told about Davos, at the least when it comes to reporting about Mr Wang’s speech.

But instead the story that showed up on the top of your correspondent’s Google News feed was an AFP article screaming China’s mobile network: a big brother surveillance tool? The article implies that China Mobile may do something extremely sinister with the information it collects about its users.

Will Moss at Imagethief has written a post summarizing just why this article’s headline is idiotic:

[F]rom what I can see in this article, China Mobile is doing much the same things as mobile telecoms operators the world over. All mobile phone operators know where you are. That’s how a mobile network works. That’s why many mobile operators and handset makers around the world are pushing location-based services, which depend explicitly on the operator knowing both who you are and where you are (as does sending you a bill). If this bugs you then you have problems much closer to home than China. And you might want to cut up your credit cards and take a sledge-hammer to your computer while you’re at it.

. I normally don’t like bringing up a negative US comparison in the face of China criticism as its an often weak rhetorical tactic I associate with comment trolls. But I think it provides a little useful perspective in this case. In fact, China may have an advantage in the mobile anonymity department in that in China, despite the best efforts of the Ministry of Information Industry, it is still relatively easy to get an anonymous, stored-value mobile phone number. Try getting an anonymous phone number in the US without resorting to cloning. Try getting a phone at all without a mobile contract and see how far you get.

Read the rest of that post for Mr Moss’ analysis of the PR implications for Chinese companies: this is is a world in which Western mobile executives say ‘location based services’ and the press says ‘economic growth’. When Chinese executives say the same thing, the press says ‘Big Brother’.

But frankly, since Mr Wang and his ilk are focusing on ‘newly prosperous’ markets, perhaps they don’t give a damn about a bit of bad press in the West.