China Mobile Is Citi's Top Pick In China Telecom Space

Telecommunication investors looking to diversify their holdings away from U.S-based companies should take a closer look at Chinese companies, according to Bin Liu of Citi.

In a report published Wednesday, Liu argued that China's fixed broadband market should "grow rapidly" over the coming years. He suggested Chinese broadband subscribers will reach 387 million by 2018, representing a penetration rate of 72 percent, up from 56 percent in 2015.

Liu added that China Mobile Ltd. (ADR) (NYSE: CHL) is expected to increase its share of broadband subscribers from 19 percent in 2015 to 25 percent in 2018, with fixed broadband revenue accounting for 5.7 percent of its total service revenue, marking an increase from 3.1 percent in 2015. As such, the company was named his top pick within China's telecommunications pace.

Related Link: China Telecom Shares Downgraded To Neutral By Citi

Liu continued that China Mobile will show faster revenue growth compared to its rivals in the coming years, which will be driven by mobile data growth and broadband and high-end user market share gains. The company also boasts a superior 4G smartphone supply and quality of its network.

China Mobile will also benefit from its operational efficiency, brand name and cost discipline — all of which will result in improved margins and a greater EBITDA.

Liu rates China Mobile's Hong Kong-listed stock with a Buy rating and HK$117 price target.