The Zacks Analyst Blog Highlights: Google, China Mobile, China Unicom Hong Kong, China Telecom and Shenandoah Telecommunications

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Jul 15, 2014, 09:30 ET

CHICAGO, July 15, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Google Inc. (Nasdaq:GOOGL-Free Report), China Mobile Limited (NYSE:CHL-Free Report), China Unicom Hong Kong Limited (NYSE:CHU-Free Report), China Telecom Corp. Limited (NYSE:CHA-Free Report) and Shenandoah Telecommunications Co. (Nasdaq:SHEN-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday's Analyst Blog:

Google Gets a Quarter-Million Take-Down Requests

Giant search engine Google Inc. (Nasdaq:GOOGL-Free Report) announced that it has received more than 70,000 requests, involving around 250,000 EU websites, to erase personal data links from its search engine. The requests come in the wake of the Court of Justice of the European Union's order that such individuals have the "right to be forgotten ("RTBF")" two months ago.

Google asserted that it is trying to conform to the European court's controversial decision, even though it stated that the ruling was vague and unreasonable. This has prompted a debate regarding the merits of the European RTBF ruling. Google finds it illogical and one that is difficult to implement consistently.

The proponents of the RTBF ruling believe that the individuals in question should be able to request removal of their personal information, which is irrelevant and can be used to violate their privacy. However, the detractors state that such policies can prompt criminals and corrupt politicians to demand deletion of their information. Moreover, the judgment to delete information from search results would hamper freedom of expression.

As per the European court, search companies are answerable for personal information that is displayed on web pages. Therefore, the court ruled that the individuals can appeal to the search engines to take down irrelevant links related to them such as news reports, court cases and other legal pages. Moreover if the information is used to breach an individual's right to privacy, then the company will have to comply with the ruling or be subjected to penalties.

Following the decision, Google received a large number of takedown requests in the first few days. Google started removing links at the end of June but the sheer number of applications has left the company with a huge backlog despite employing more staff. Google has had to deal with legal costs as well as unnecessary additional operational costs for hiring staff. The process is also very time-consuming as it involves reviewing each application before deletion.

Google had mistakenly deleted links involving articles in a British newspaper, The Guardian, but later reinstated them creating a controversy in Europe. Therefore, Google stressed that it is struggling to comply with the RTFB ruling and has assigned a panel of experts to help it deal with the vague and illogical standards set by the court.

Google shares currently hold a Zacks Rank #3 (Hold).

Chinese Telcos Form Tower-Sharing JV

Three state-run telecom operators of China have established a joint venture company named China Communications Facilities Services to share telecom infrastructure and reduce their related capital expenditure.

The newly formed company has a registered capital of 10 billion yuan ($1.6 billion) with the world's largest wireless carrier in terms of subscriber base – China Mobile Limited (NYSE:CHL-Free Report) – holding a majority 40% stake. Meanwhile, China Unicom Hong Kong Limited (NYSE:CHU-Free Report) will have a 30.1% stake, while China Telecom Corp. Limited (NYSE:CHA-Free Report) will hold the remaining 29.9%.

China Communications Facilities Services will focus on construction, maintenance and operations of wireless towers apart from providing power and air conditioning for base stations. Additionally, the company will also outsource maintenance services of base station equipment to third party vendors. The three operators are currently mulling over the respective tower assets which they will contribute to the joint venture to make it a success.

The project dates back to April 2014 when the three companies had declared their plans to set up an infrastructure-sharing joint venture in a bid to reduce costs, but at the same time, ramp up the efficiency of rolling out their individual networks.

Notably, the three Chinese operators won the LTE-TDD license in Dec 2013 and since then have launched their services in different parts of the country. However, China Mobile secured a competitive edge in 4G owing to the compatibility of its 3G standard (Time Division Synchronous Code Division Multiple Access or TDSCDMA) with TD-LTE.

To curb China Mobile's dominance, China Unicom and China Telecom are undergoing a hybrid network trial by integrating both the TDD-LTE (Time Division Duplex) and FDD-LTE (Frequency Division Duplex) Standards in 16 different cities in the mainland.

According to the telecom giant trio, the tower sharing deal will reduce unnecessary construction of towers. We believe apart from controlling costs, it will also allow faster roll out of networks.

Further, the advent of free messaging apps has taken a toll on the carriers' income from text and voice services, resulting in declining revenues. In this regard, the new joint venture can prove instrumental in giving a new lease of life to the company's top line, at least to some extent.

China Mobile holds a Zacks Rank #4 (Sell), while China Unicom and China Telecom currently carry a Zacks Rank #5 (Strong Sell). A Zacks Rank #1 (Strong Buy) stock worth considering within this sector is Shenandoah Telecommunications Co. (Nasdaq:SHEN-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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