Key Takeaways From China Mobile’s 2016 Results

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China Mobile (NYSE:CHL), the largest Chinese wireless carrier and fastest-growing broadband provider, published its Q4 and full year 2016 results on Thursday, meeting market expectations on earnings. While revenues for the year grew by about 6% in RMB terms, driven by an expanding wireless data and wireline broadband business, net profits (excluding one-time gains) rose by about 10.5%. However, the carrier’s growth in dollar terms was impacted by a ~5% depreciation in the RMB versus the U.S. dollar over the last year. Below we provide some of the key takeaways from the China Mobile’s earnings release.

Trefis has a $65 price estimate for China Mobile, which is about 15% ahead of the current market price.

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

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China Mobile’s wireless business fared well, adding about 22.7 million net subscribers over the last year, with its mix of 4G customers rising by about 25% year-over-year to 63%. ARPU also improved marginally to about RMB 57.5, on account of a higher mix of high-speed customers, although its 4G ARPU likely declined due to lower per MB data charges (down 36%). The wireless business could see some headwinds in the near term, as the government has asked Chinese carriers to eliminate mobile roaming charges and fees for long-distance calls nationwide, while also continuing to cut data charges. China Mobile expects the move to result in a loss in revenues and profits to the tune of about 19 billion yuan ($2.7 billion) over the next year.

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The wireline broadband business has become a big focus area for Chinese telecom companies, as they look to take advantage of China’s Internet Plus policy, which aims to drive the economy via an all-digital strategy. China Mobile’s broadband business outperformed its peers, with subscriber adds accelerating to 22.6 million, bringing its total subscriber base to 77.6 million. China Mobile is now the second largest broadband provider in the country, ahead of China Unicom. However, wireline broadband ARPU remained almost flat, as the carrier continued to offer aggressive pricing in order to win over new customers.

Much like its smaller two rivals, China Mobile expects capital expenditures to decline this year. However, its cuts are smaller, with total capex projected to fall by about 6% to RMB 176 billion ($25.3 billion). While investments into its 4G mobile and wireline broadband networks are likely to see declines, the carrier is likely to bolster investments into its data centers and related infrastructure.

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