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SCMP Reporter

Dominant cellular carrier China Mobile (Hong Kong) faces another round of selling if a reasonable dividend does not accompany full-year results to be released tomorrow, according to analysts.

China Mobile had promised fund managers - who increasingly treat the once high-growth company as a utility play - it would pay its first dividend for the full year ending December.

Although analysts expect China Mobile to report strong year-on-year growth in actual earnings, the figures are likely to be helped by the company's US$10.2 billion acquisition of eight provincial mobile networks from parent China Mobile Communications in June.

According to Thomson First Call consensus estimates, China Mobile's revenues are expected to grow about 40 per cent to HK$124 billion, with net profit growth of 27.5 per cent to HK$31.1 billion.

But on a pro forma basis, Deutsche Bank analysts Fung Ee Lim and Tucker Grinnan estimate revenue growth for last year at just 13 per cent.

With competition intensifying, analysts have factored in a continuing decline in per user revenue and overall earnings growth.

China Mobile is under pressure from direct rival China Unicom and city-wide mobile services - known as Xiaolingtong - now offered by fixed-line carriers.

'We believe the market is currently unable to identify a justifiable reason to own the stock and the uncertainty about the competition environment has offered the market a reason to reduce holdings,' Deutsche Bank said.

'Obviously the company has little or no control over either the actions of its competitors or the regulatory process. But it does have control over its ability to pay out a reasonable dividend.'

To offset slower growth prospects and high regulatory risks, China Mobile is widely expected to distribute at least 15 per cent of its profit to shareholders.

Investors' dividend expectations have been building in the wake of generous dividend announcements last week from companies such as SmarTone Telecommunications and Citic Pacific.

Rival China Telecom promised a dividend yield of about 4.5 per cent at the time of its listing in November.

According to Thomson First Call, analysts on average expect China Mobile to pay a dividend of 24 HK cents per share. Estimates vary from as low as 10 per cent (or 16 HK cents per share) to 30 per cent (47 cents HK per share).

Based on last Friday's closing of HK$16.20, the expected dividend yield for the giant mobile carrier is 1.5 per cent.



China Mobile will need hefty payout to satisfy investors