Reviewing China Mobile’s First Half Results

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CHL
China Mobile

China Mobile (NYSE:CHL), China’s largest wireless carrier, published its first half 2016 interim results on Thursday, August 11, reporting reasonably strong growth, driven by its recent subscriber adds, product sales and rapidly growing 4G mix. ((China Mobile Earnings Presentation)) Below we provide some key takeaways from the carrier’s earnings release.

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  • Revenue growth was driven by recent wireless and wireline subscriber adds, strong migration to 4G services, as well as a favorable comparison with 2015, when VAT reforms hurt revenues.
  • This was partially offset by RMB depreciation (about -4.8% year-over-year)
  • EBITDA margins compressed following the transfer of the firm’s wireless tower assets to the China Tower JV. This moves tower expenses from the depreciation header (not included in EBITDA) to the leased lines and network asset expenses header.
  • FY’16 revenue growth could face some pressure on account of the government’s tariff reduction requirement for 4G services. Chinese regulators are also looking at the possibility of cancelling long-distance and roaming tariffs. 

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  • 4G net adds stood at a strong 10.8 million for the first half, marking a slight increase over last year. That said, it is possible that 4G subscriber growth could slow going forward on account of the China Unicom-Telecom network collaboration.
  • While overall wireless ARPU grew amid an increasing mix of 4G subscribers (51%), 4G ARPU saw a slight decline due to the government’s speed increase and tariff reduction requirements, which offset the growth in per subscriber data consumption.
  • SMS and voice usage continue to trend lower, hurt by substitution by over-the-top services.
  • The carrier’s wireline broadband market share rose from about 22.9% to about 25.5%, while ARPU also saw an improvement over 2015 amid increasing proportion of high-speed broadband customers and increased fiber-to-the-home utilization.

Note: While the company reports its results in RMB, we have converted key financial metrics into USD for the purpose of this article. Year-over-year growth figures may diverge from the company’s reported metrics, on account of the depreciation of the RMB vs. the USD.

See our complete analysis for China Mobile