By Perry Wu
A lukewarm reception greeted China Mobile's (CHL) latest quarterly report card last week. On the face of it, the company continues to do well. Operating revenue was up 30%, and net profit climbed by 20%. But its stock price barely moved and investors seemed unimpressed.

Why investors seemed less than happy became clear as several reports came out pointing to a slowing subscriber growth rate. One article said that China Mobile "faces a battle to keep earnings growth going." With China's cities largely saturated with mobile phones, new growth is coming more from outlying and rural areas. People in these areas tend to spend less, so already some investors are talking about the "maturation" of the Chinese mobile phone market.

That would be a big mistake. Investors who just concentrate on the quarter-to-quarter subscriber growth are missing the big picture. The value of China Mobile (and to a lesser extent, China Unicom) lies not so much in its mobile phone subscribers, but in its value as one of the only operator in China's mobile information super-highway.

Super-highway? It sounds so early 90s, when the big buzzword was "information super-highway", but it is still an appropriate metaphor for China Mobile. If you are a wireless content provider like Linktone (LTON) or one of dozens of similar companies, you have to deal with China Mobile. If you want to advertise to Chinese mobile phone users, you have to deal with China Mobile. China Mobile is the operator of the only toll-both to the highway.

And surprisingly this dominance only seems to be getting stronger. In other countries with market-based economies, monopolies tend to lose power over time as competitors and the government exert pressure (e.g. Microsoft). But in China, the reverse seems to be happening as the government has allowed China Mobile, especially this past year, to engage in hardball tactics against wireless providers. Sohu (SOHU), Sina (SINA) and Linktone are just some of the companies who have felt China Mobile's wrath in the past year.

This harsh treatment of wireless providers shows no signs of ending. When you talk to executives at companies doing business with China Mobile these days, there is uniform resignation at the inevitable uphill battles with the monopoly. One indicator (I have mentioned this in previous articles): China Mobile takes an extremely inattentive attitude to its payments on accounts payable. The lesson: if China Mobile owes you money, don't hold your breath.

So fear not as you look at China Mobile's subscriber numbers. At 214 million subscribers, they are still impressive, and are not even the end story. As it stands today, China Mobile is holding all the wireless cards.

About the author:
Perry Wu is a writer and correspondent for ChinaTechNews.com and can be reached here at the site. Perry Wu does not hold any positions, long or short, on any of the Chinese or American company securities mentioned in this article.