Key Takeaways From China Mobile’s Q1

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China Mobile (NYSE:CHL), the world’s largest wireless carrier, published its unaudited key performance indicators for Q1 2016 last week, reporting reasonably strong growth, driven by its recent subscriber adds, terminal sales and rapidly growing 4G mix. ((China Mobile Press Release)) Below, we provide some of the key metrics and takeaways from the carrier’s report.

CHL_Q1_16_1

 

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Key Takeaways

 

  • Revenue growth was driven by 4G uptake, promotions and a favorable comparison with Q1 FY’15 when VAT reforms hurt the top line.
  • Depreciation of RMB (-4.5% year-over-year) partially offset revenue and profit growth figures.
  • FY’16 revenue growth could face pressure on account of government tariff reduction requirement.
  • Transformation of sales and marketing model could drive operating margin growth going forward.

 

CHL_Q1_16_2

Key Takeaways

  • ARPU declined despite data growth, owing to per-unit data tariff reduction and the unused data carry forward policy instituted last year.
  • 4G mix stands at 45% of total user base, up from just 18% a year ago. It is possible that 4G subscriber growth could slow going forward on account of China Unicom-Telecom network collaboration.
  • SMS and voice usage continue to trend lower, hurt by substitution by over-the-top services.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for China Mobile