What To Expect As China Mobile Publishes Q4 Earnings

China Mobile (NYSE:CHL), the world’s largest wireless carrier, is expected to publish its Q4 and full year 2016 earnings in early March. Below we provide a brief overview of some of the key factors to watch when the carrier publishes its results.

We have a $65 price estimate for China Mobile, which is roughly 20% ahead of the current market price.

See our complete analysis of China Mobile | China Unicom | China Telecom

Wireless Business Will Expand On Higher 4G Uptake, ARPUs

China Mobile’s revenues should expand on a year-over-year basis, driven by a growing wireless subscriber base and better ARPU. The company added 5.2 million customers in Q4 2016, with roughly 54 million additions or migrations to its 4G services, driven by its coverage advantage over smaller rivals (1.4 million 4G base stations projected at the end of 2016, compared to 850k for China Telecom). Its wireless ARPU also likely trended higher, amid a higher mix of 4G subscribers (63% of subscriber base on 4G as of December, compared to about 40% in January 2016) although 4G ARPU could be impacted by lower data rates and the government’s unused data carry-forward policy. China Mobile has seen its EBITDA margins decline following the transfer of its wireless tower assets to the China Tower JV, on account of higher leasing expenses. However, this metric should gradually improve as the sharing ratio improves, with more base stations from the three participating carriers being housed on each tower.

Wireline Broadband Will Continue To Expand Rapidly

Broadband internet services have become a key focus area for Chinese telecom companies, given the still (comparatively) low penetration and a decline in traditional fixed line services. China Mobile’s performance in this space has been particularly impressive. Despite its relatively late entry – it was awarded licenses only in 2014 – the carrier added about 22.5 million new subscribers during 2016 (compared to about 10 million net adds for China Telecom and 2.9 million for China Unicom). China Mobile has been expanding its broadband subscriber base via a mix of acquisitions and competitive pricing.

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