China Mobile falls behind on mobile service revenue: OCBC

The bank has estimated China Mobile's mobile service revenue dropped 7% year-on-year.

China Mobile Limited’s mobile service revenue underperformed in the fourth quarter of 2020, compared to its competitors, OCBC Investment Research said.

China Mobile reported its profit for the year rose to $128.4b (RMB108.14b) in 2020, from $126.7b (RMB106.7) in the previous year. Its operative revenue reached $912.07b (RMB768.1b), representing a 3% year-on-year increase.

The company attributed this to its telecommunication services revenue that rose 3.2% to $826b (RMB695.7b).

OCBC Investment Research, however, noted that based on its fourth quarter performance China Mobile was “lagging behind peers in mobile service revenue”.

“We estimate mobile service revenue to have declined by ~7% YoY, which underperformed that of China Telecom (+5% YoY) and China Unicom (+4% YoY),” OCBC said.

“This decline was also larger than that registered in 3Q20 (-0.2% YoY).” This was attributed to increased 5G discounts during the end of 2020.

Its full-year dividend per share, meanwhile, increased 1.2% YoY to $3.29.

Moreover, a more stable, if not an increase mobile average revenue per unit (ARPU) is expected in 2021, driven by the 5G ARPU.

China Mobile’s 5G ARPU was recorded at $108.4 (RMB91.3). A 6% growth in users’ ARPU was also seen as they switched to 5G.

“Reassuringly, we note that capex for FY21 is guided for a mild increase of 1.6% to RMB 183.6b,” OCBC said.

“Management is of the view that 2020-2022 will be the peak period for capex, and this should meaningfully decline in 2023.”

China Mobile is expected to deploy 120K 5G BTS on 2.6GHz in 2021 and add more 400k 700MHz 5G BTS in partnership with China Broadcasting Network from 2021-2022.

The company is targeting a more stable and healthy growth in service revenue as well as in DPS.

“All considered, we introduce our FY22 forecast and following adjustments, we lower our fair value slightly from HKD56.81 to HKD55.81,” OCBC said.