The US government recommended that China Mobile be denied permission to enter the US telecom market due to national security concerns. The National Telecommunications and Information Administration (NTIA) stated that the Federal Communications Commission (FCC) should reject the Chinese company’s application to provide telecom services to the US market because it came with risks of exploitation by the Chinese government.
The NTIA, which is not satisfied with the Chinese government’s track record on intelligence actions and economic espionage, believes that China Mobile’s resources could be used by the regime for its own gains against the US.
At a time when trade tensions are escalating between the US and China, this move comes as another blow. The US-declared tariffs on $34 billion worth of Chinese imports is set to go into effect later this week to which China has promised to respond in kind.
China Mobile is the largest mobile phone operator worldwide in terms of subscribers, with close to 900 million customers. The company generates the majority of its revenue domestically so it is less likely this move will have any significant impact on it, but the stock still tumbled to its lowest level in four years.
Some analysts remain bearish on China Mobile due to a low potential for growth in subscribers as well as upcoming high capital expenditures for the deployment of 5G technology. According to a report by Bloomberg, China Mobile’s stock has dropped 40% since April 2015 wiping out $125 billion from its market cap. Some have expressed optimism that the company’s 5G investments will pay off provided they are implemented in time giving it an advantage over rivals.