China Mobile Starts New Era as Wang Leaves 王建宙退休，中国移动开启新时代

By newsdoug on March 22, 2012

China Mobile to enter new era with Wang departure I have just one word in reaction to the news that Wang Jianzhou will formally step down from China Mobile (HKEx: 941; NYSE: CHL) from the helm of China’s dominant mobile carrier either today or tomorrow: Finally! I hate to sound so negative about Wang, as he has certainly done a lot of good things at China Mobile since taking over as chairman nearly 8 years ago. In fact, he did help the company consolidate its place as China’s dominant telco, at one point grabbing over 70 percent of the mobile market as it used its strong position to trample China Unicom (HKEx: 762; NYSE: CHU), its smaller unfocused rival. But like many chief executives, Wang was guilty of overstaying his welcome at the company he led, causing China Mobile to lose its own focus and become a stumbling giant that has recorded little or no profit growth in the last few years. According to media reports, Wang’s retirement will be formally announced either today or tomorrow, and he will be replaced by Xi Guohua, who last year was named vice chairman of China Mobile’s parent company. (Chinese article; previous post) Of course, now that Wang is finally leaving the tributes will start pouring in commending him for his fine work. One report points out that when he took over at the top of China Mobile, the company’s annual revenue was 192 billion yuan, and its net profit was 42 billion yuan. The revenue figure more than doubled to 528 billion last year, while profit nearly tripled to 125.9 billion yuan. Of course it didn’t hurt that China Mobile, as the nation’s former mobile phone monopoly, was already China’s clear leader when Wang took over, nor that the country’s market was still relatively untapped with just a quarter of the nation’s 1.3 billion people owning mobile phones at that time. Wang took advantage of those factors to aggressively consolidate China Mobile’s position during his first 5 years on the job. But as happens with many corporate leaders, he seemed to lose his focus in his last 3 years, fixating on a global expansion policy that resulted in a number of attempted overseas acquisitions that nearly all ultimately failed. As recently as earlier this month, Wang was still talking about such acquisitions — even though they have contributed nothing to the company during his tenure. (previous post) Furthermore, Wang has lost valuable ground to Unicom and smaller rival China Telecom (HKEx: 728; NYSE: CHA) by dragging his feet in developing China Mobile’s 3G service that will be critical to its future, after being ordered to build its network using an untested China-developed technology. As a result, it now only controls about 40 percent of the 3G market, far less than its two-thirds share for China’s overall mobile market. With Wang finally gone, look for Xi and Li Yue, the company’s other recently installed top leader, to start taking some interesting risks and getting more aggressive with 3G. We’ve already seen what the future could look like, following recent reports of an interesting tie-up between China Mobile and a national cable TV operator now being formed through consolidation of China’s various regional networks. Look for more of that in the year ahead, as these new leaders try and breathe some new life into China Mobile after Wang’s departure.

Bottom line: China Mobile will become a more dynamic, risk-taking company in the year ahead after the imminent departure of long-serving Chairman Wang Jianzhou.

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