What Would Happen To The Markets If Mobiles Did Give You Cancer?

In my Money Week column this week I've been looking at what it would mean for the markets if mobiles did give you cancer. Here's a taster....

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 to sharply raise interest rates.
But there is one risk that most people probably haven’t thought about at all.
What if mobiles really do give you can cancer?
Speculation of a link between cellular technology and brain diseases has been running for a decade or more. But last week the World Health Organisation said its latest studies suggested there was a possible link between talking on your mobile and cancer.
Leave aside the medical implications for a second – although there are serious enough. This is a huge issue for the markets as well. Just think about the hundreds of billions of investment now tied up in keeping everyone texting and talking on their phones all day. From the operators, to the equipment suppliers to the handset manufacturers, to the computer and software industries, many of the largest companies in the world could be devastated if a meaningful link was ever proved.
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.
Of course, there is still no proven link between mobiles and brain disease. The WHO is not claiming that there is. It’s International Agency for Research on Cancer gathered together 31 experts to meeting 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 is not saying it is definite. And it isn’t ruling it our either.
For anyone tracking the industry, that isn’t particularly helpful. Lots of studies have been done of potential links to cancer, and none of them have been very conclusive so far. Mobiles appear to have some health impact. Against that, there has been no big increase in the rates of brain cancer in the twenty years or so since mobiles became a ubiquitous part of everyday life. And it is difficult for anyone to assess the data accurately because brain caner is a relatively rare condition, so there are not very many people to study.
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 with that material 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.
This is a massive industry. According to the International Telecommunication Union, there are now 5.3 billion mobile subscriptions. That is 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 those networks. The rise of smartphones means that even more is being spent each year, and people are doing more, and spending more money on their phones. Tablet computers will only send those figures even higher.
On just about every major bourse, the big mobile players are among the leading companies. Vodafone – with a market value of £83 billion – is a giant of the FTSE. France Telecom, which owns Orange, is one of the largest businesses on the CAC-40. The world’s largest mobile operator, China Mobile, is 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 $25 billion. Much of the South Korean stock market 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. Chips and other components manufacturers help sustain the commodities boom. Many retailers depend on the sales of phones. So do the new generation of app writers.
In short, mobiles have fuelled much of the growth of the world economy in the past decade. A cancer link would be an economic catastrophe as well as a medical one.
There is not a great deal investors can do about it. But they should be monitoring the medical data, and keeping up with the latest developments. And they should be preparing an exit strategy. If a link is ever decisively proved you don’t want to be holding the shares or bonds of any of the main players in the industry. You might no want to be holding equities full stop – the knock-on effects for the rest of the markets would be 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 – and with the shares yielding 4%, it might be worth tucking a few of those away. If we all decide to get rid of our mobiles and start calling one another on the landline again, they will soar in value.