• 16 JUN 11
    • 1

    Keep an eye on mobile phones – they could 
bring down the global economy …

    Sent in by Sharon Noble:

    From Moneyweek, 10 June 2011

    There is no 
shortage of stuff 
out there to 
make investors 
feel nervous. 
The euro could 
get blown apart if a long, 
hot summer of protest in 
Greece and 
Spain boils over 
into civil unrest. 
The Chinese 
economy might suddenly turn down, 
removing just about the only source of 
global growth. Inflation might suddenly 
rip out of control, provoking central 
banks into raising interest rates sharply.

    But there is one other risk that most 
people probably haven’t thought about. 
What if mobile phones really do give you cancer? Mobile technology has the 
potential to be another tobacco – a huge 
and powerful industry that was just about 
destroyed by the unfortunate fact that it 
killed people. If this happens, hundreds of billions will be wiped off stockmarkets 
around the world.
    Of course, there is still no proven link 
between mobiles and brain disease. The 
World Health Organisation (WHO) is not 
claiming that there is. Its International 
Agency for Research on Cancer gathered 
together 31 experts in Lyon last week to 
review the available evidence. It concluded 
that there was a ‘possible’ link between 
mobiles and a type of cancer called 
glioma. The WHO has five rankings of 
cancer risk, ranging from carcinogenic to 
probably not carcinogenic. The ‘possible’ 
ranking is right in the middle of the range. 
So it’s not saying there is a definite link. 
Yet it isn’t ruling one out either.

    For anyone tracking the industry, that isn’t 
particularly helpful. Lots of studies have 
been done of potential links to cancer, and none have been very conclusive so far. Mobiles appear to have some health 
effects. Against that, there has been no big increase in the rates of brain cancer in 
the 20 years or so since mobiles became a 
ubiquitous part of everyday life. It’s hard 
to assess the data accurately because brain 
cancer is a relatively rare condition, so 
there are not very many people to study.

    Over a billion handsets are sold every year

    But just because cancer rates haven’t taken 
off yet, it doesn’t mean they won’t. People 
were smoking heavily for a long time 
before the damage that tobacco does to 
your health became apparent. Asbestos 
was widely used in building for decades 
until the risks were discovered. Right now, all that anyone can say is that there 
is some form of risk, which the medical 
experts will need to keep an eye on. What 
we do know for certain is that, if a link 
were ever proved, or were simply to move 
up from possible to probable, then the 
economic implications would be huge. That’s mainly because this is a massive 
industry. According to the International 
Telecommunication Union, there are now 
5.3 billion mobile-phone subscriptions. 
That takes in 77% of the world’s 
population. More than a billion handsets 
are being sold every year. Vast quantities 
of capital have been poured into building 
mobile networks. The rise of smartphones 
means that people are doing more with 
and spending more money on their phones 
every year. The rise of tablet computers 
will only send those figures even higher.
    On just about every major bourse, the 
big mobile-phone players are among the 
indices’ leading companies. Vodafone – with a market value of £83bn – is a giant 
of the FISE. France Telecom, which owns 
Orange, is one of the largest businesses on 
the CAC-40. The world’s largest mobile 
operator, China Mobile, is also one of the 
world’s biggest companies. Nokia may be 
struggling to re-invent itself, but it is still 
the world’s major handset manufacturer, 
and worth $25bn. Much of the South 
Korean stockmarket depends on the 
mobile divisions of Samsung and LG. 
New players, such as Taiwan’s HTC, have 
soaring share prices (indeed, it recently 
overtook Nokia in value). And, of course, 
Apple, which is now critically dependent 
on its iPhone, is now the third-biggest 
company in the world. It doesn’t even stop there. Microsoft and 
Google have invested fortunes in creating 
mobile software divisions. Manufacturers 
of chips and other components help to 
sustain the commodities boom. Many 
retailers depend on the sales of mobile 
phones, as do the new generation of app writers. In short, mobile phones have fuelled much of the growth of the 
world economy in the past decade. A link 
between this technology and cancer would 
prove an economic as well as a medical 
catastrophe.

    So what can investors can do 
about it?

    For starters, investors should be 
monitoring the medical data and keeping 
up with the latest developments. They 
should be demanding that the mobile 
companies do everything they can to 
research the risks – and mitigate them. 
There is no point in simply denying that such a risk exists, in the way that the tobacco industry did for decades. 
Investors should also be preparing an exit 
strategy. If a link is ever proved beyond a 
doubt, you don’t want to be holding the 
shares or bonds of any of the main players 
in the industry. You might want to avoid 
holding equities full stop – the knock-on 
effects for the rest of the markets would 
be so severe.

    Meanwhile, don’t give up on some fairly 
old-fashioned technologies. Fixed-line 
operators, such as British Telecom, could 
be set for one of the greatest bounce backs 
of all time. The shares yield 4%, so tuck a 
few away. If we all decide to get rid of our 
mobiles and start using the landline again, 
these shares will soar.

    www.moneyweek.com

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