Analysts upbeat on China Mobile

PUBLISHED : Monday, 18 March, 2002, 12:00am
UPDATED : Monday, 18 March, 2002, 12:00am

Analysts expect that China Mobile, having disappointed investors six months ago, will buoy the market with strong results and for the first time declare a dividend.

The majority of nine brokerage firms surveyed were upbeat about the full-year results of the mainland's dominant mobile-phone operator, citing continued subscriber growth, rising data-service revenues and lower-cost capital expenditure.

Thomson Financial First Call's consensus projects a 46.3 per cent year-on-year gain in net profit for China Mobile to 26.39 billion yuan (about HK$24.7 billion).

Of the surveyed brokerages nine expect the mobile carrier's net profit to range between 27 billion yuan and 28.4 billion yuan, with the majority falling in a tight range of 27.4 billion yuan to 27.6 billion yuan.

Worries about slowing subscriber growth and falling monthly tariffs in China, coupled with the expectation of more competitors, punished China Mobile's share price to a year-on-year drop of 32.2 per cent to Friday's closing at HK$24.90. However, investor sentiment changed recently after indications that the operator would report solid earnings.

Minister of Information Industry Wu Jichuan also indicated two weeks ago that the valuation of China Mobile was reasonable at the present price level.

The mobile carrier disappointed investors with its interim result of 13.8 billion yuan net profit that missed consensus market forecasts by 10 per cent to 15 per cent.

Reduced expectations and release of quarterly operating statistics would lower the risk of big surprises, CLSA telecommunications analyst Edison Lee said.

Analysts expect a 30 per cent saving in capital expenditure, strong revenue growth in data services and an ease in the decline of per-user revenue.

One share-price catalyst would be the announcement of a full-year dividend payment, HSBC Securities research analyst Colin McCallum said.

'We believe management is seriously considering making a dividend payment,' Mr McCallum said in a research report.

A dividend would have a particularly strong impact in China Mobile's case, underpinning the share price both by enhancing fund managers' performance and by allaying long-held fears that cash will eventually be siphoned off into less profitable areas.

Another share-price catalyst that analysts expect to see today is more clarity on the company's acquisition financing plans.

The mobile carrier announced at the end of last year plans to raise proceeds to acquire the remaining eight provincial mobile networks from its parent through the issuance of Chinese depository receipts.

Despite analysts' optimism, the possibility of a continued decline in average revenue per user (arpu) will still be a focus for concern this afternoon.

Analysts are expecting China Mobile's full-year blended arpu for last year to drop to between 142 yuan and 148 yuan, from 158 yuan in 2000, representing a moderate decline of between 6.3 per cent and 10.1 per cent.

Another aspect investors will watch for will be China Mobile's new guidance on capital expenditure for the next three years, which will also reflect the expected growth in subscribers, according to Mr Lee.