China Mobile (NYSE:CHL), the largest Chinese wireless carrier, had a relatively mixed first half of 2018, as growth in its core mobile business began to show some signs of slowing down, with its smaller rivals accelerating their subscriber additions. In this note, we take a look at how the company fared over the first half of the year and what lies ahead.
Our interactive dashboard on what lies ahead for China Mobile in 2018 details our expectations for the company through the rest of the year. You can modify any of our forecasts or key drivers to see the impact that changes would have on China Mobile results.
The carrier’s service revenues, adjusted for a new revenue recognition standard, grew by 5.5% to RMB 356 billion RMB ($52 billion), driven by a growing wireless and wireline broadband subscriber base. Meanwhile, its EBITDA margin expanded by 1% to 37.2%, driven by better control of marketing costs, lower equipment sales and lower base station operating costs. The company’s overall wireless ARPU fell from RMB 62.2 to RMB 58.1 ($8.45), despite a stronger mix of 4G users (75% subscribers were on 4G services at the end of H1, compared to 69% a year ago). The decline was due to lower handset data charges and the government’s move to cut roaming and long distance charges.
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With the growth in the core mobile business slowing down, China Mobile has been looking towards its wireline broadband operations and emerging businesses to drive future growth. On the broadband front, the company saw strong traction, with its subscriber base rising to 135 million in June 2018, from about 93 million in June 2017. The company noted that it accounted for about 57% of total household broadband net additions in China during the period. Notably, broadband ARPU also saw a marginal increase during the period to RMB 35. This is encouraging, considering that China Mobile had been playing the pricing card to win over new customers over the last few years. The company’s emerging businesses – such as video and mobile wallets also saw some traction, with revenues rising by 17.8% to about $4 billion.
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