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China Mobile May Tie Up With Huawei to Buy Brazilian Carrier

Zacks Equity Research

According to industry grapevines, China Mobile Limited CHL is reportedly considering to join forces with another state-owned telecom firm in order to bid for struggling Brazilian carrier Oi SA. The strategic collaboration with Huawei Technologies Co. — the leading telecom equipment manufacturer in China  —  would enable both companies to extend their footprint in the Latin American market, while benefiting from the upcoming 5G deployment in Brazil.

The move follows the recent approval of a bill by the Brazilian Senate to upgrade the telecom infrastructure of the country for a likely roll out of 5G technology. This is likely to enable Oi, which has a huge debt-laden balance sheet, to sell about $2 billion worth of non-core assets or eventually merge with other firms to fuel its growth engine. Although company spokespersons from the related companies have denied the rumors, speculations are rife that China Mobile would also follow the inorganic route to mark its foray in the Brazilian markets.

5G is billed as the technology of the future with faster download speed and seamless transfer of data. Leveraging state-of-the-art communication network architectures, 5G is touted to be the primary catalyst for next-generation IoT services. These include connected cars, coupled with augmented reality and virtual reality platform, smart cities and connected devices that revolutionize key industry verticals.

Moreover, 5G is likely to augment the scalability, security and universal mobility of the telecommunications industry, which is expected to propel the wide proliferation of IoT. The telecom firms are facilitating customers to move away from an economy-of-scale network operating model to demand-driven operations, and seamlessly migrate to 5G by offering easy programmability and flexible automation.

As the battle for 5G supremacy intensifies, various countries are increasingly devising newer avenues to outsmart rivals. These include out-of-the-box ideas for innovative product concepts to redefining strategies within a framework in accordance with the changing demands of customers. It remains to be seen which country achieves the coveted technological dominance in this race.

China Mobile currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the broader industry are Nokia Corporation NOK, PC-Tel, Inc. PCTI, both sporting a Zacks Rank #1 (Strong Buy), and Viasat Inc. VSAT, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.    

Nokia beat earnings estimates thrice in the trailing four quarters, the average being 89.3%.  

PC-Tel beat earnings estimates thrice in the trailing four quarters, the average being 146.4%.  

Viasat beat earnings estimates in each of the trailing four quarters, the average positive surprise being 230.6%.

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Nokia Corporation (NOK) : Free Stock Analysis Report
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China Mobile (Hong Kong) Ltd. (CHL) : Free Stock Analysis Report
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