Tickers in this Article: CHL, BIDU, GOOG, CHA, CHU, MSFT, AAPL
You can never really tell what a company's management team will come up with when thinking about how to fuel the next leg of growth. While I can understand why China Mobile (NYSE: CHL), China's largest mobile phone company, might want to diversify and deploy some of its substantial cash holdings, I was initially a little surprised by the latest idea.

According to a very brief announcement from Xinhua News Agency, China Mobile and Xinhua are going to collaborate to launch a new search engine company in China. So, a company that has enjoyed a sizable market share virtually from the first day of operation is volunteering to challenge Baidu (Nasdaq: BIDU) and Google (Nasdaq: GOOG) on their home turf.

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The absence of details will lead to assumptions and reading between the lines, but it would seem to make the most sense for this partnership to focus on mobile search. In China. Baidu holds approximately 70% share of the traditional search market (Google has upwards of 24%), but the market shares in mobile are substantially different. Specifically, sources indicate that Baidu's share in mobile search is more on the order of 34%, with Google's share around 12%. Given that China Mobile itself holds about 70% share of the Chinese cell phone market, that would seem to be the most straightforward opportunity for this new venture.

Controlling The Message?
With Xinhua's announcement proclaiming that the business venture will "make full use" of Xinhua's position, I read that as saying China Mobile will have privileged access to all the news that the central government deems fit to print. Given the series of spats between Google and Chinese government officials, I have to wonder if this partnership is the central government's way of attempting to keep a firm hand in the burgeoning information market in China. After all, Xinhua News Agency is state-controlled, and China Mobile's operations are conducted (to some extent, at least) under the aegis of the government.

Could China Mobile Pay For This Down The Road?
There is no question that having the Chinese government on board has been a boost to many companies operating within China. That said, I wonder if that will continue to hold true. Will there come a point when Chinese citizens tire of their government's role in regulating their lives, and will they look to punish companies they perceive as "willing collaborators"? (For related reading, check out Top 6 Factors That Drive Investment In China.)

Where Else Could China Mobile Go?
I do not envy the position of China Mobile's management. It is already the largest company in the largest market in its industry, and rivals like China Telecom (NYSE: CHA) and China Unicom (NYSE: CHU) seem to be getting a boost from the Chinese government's desire to have a little more competition in the market.

Elsewhere in Asia, most of the easy money has been made in basic mobile services, and there are multiple competitors in most markets. Moreover, even if China Mobile were to join the rush of Chinese companies looking to do business in Africa; there, too, the company would find competition already in place. In other words, I am not sure simply setting up shop as a mobile operator in another country will do much for China Mobile's growth.

It's A Matter Of Context
In that context, then, the move to ancillary services makes a fair bit of sense. These are interesting times for media and technology, as companies like Google, Microsoft (Nasdaq: MSFT), Apple (Nasdaq: AAPL) and now China Mobile blur the lines between hardware, software, services and media. What seems to be clear, though, is that people around the world love their cell phones and are absolutely willing to pay to do more with them. With China Mobile already owning the theatre, so to speak, it would seem to make sense for it to expand into selling concessions, merchandise and whatever else customers want once they are in the building. (For more, see Investing In China.)

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