China Mobile Q1 Earnings Fall, Revs Rise - Analyst Blog
April 29 2014 - 10:00AM
Zacks
China Mobile
Limited (CHL), the world’s largest mobile operator by
subscriber base, announced first quarter 2014 results with adjusted
net income of RMB 25.24 billion ($4.13 billion) that fell 9.4% year
over year due to operational challenges and stiff competition. Net
income margin for the quarter came in at 16.3% compared with 19.4%
in the first quarter of last year.
Revenues &
EBITDA
In the first quarter, total revenue
climbed 7.8% year over year to RMB 154.83 billion ($25.31 billion).
The carrier continues to build its 4G (Time Division-LTE) network
and plans to build a superior 4G LTE network. Meanwhile the company
also enhanced its 3G/4G marketing capabilities by increasing the
sale of devices and optimizing its tariff structure.
EBITDA came in at RMB 57.59 billion
($9.42 billion), down 5.9% from the prior-year quarter. EBITDA
margin was 37.2%, down 540 basis points from first quarter of
2013.
In Dec 2013, the company inked a
long-term co-operation agreement with Apple Inc.
(AAPL) to sell iPhone models through its TD-LTE and TD-SCDMA
network.
Subscribers
China Mobile added 13.88 million
new subscribers to reach 781.08 million at the end of the first
quarter. Subscribers grew 1.81% from the year-ago quarter.
China Mobile’s 3G business is
growing at a fast pace since its introduction and has become one of
the major drivers of revenue growth. The company’s total 3G
subscriber base reached 224.98 million, with 33.35 million new
customers added in the reported quarter.
China Mobile received TD-LTE (Time
Division Long Term Evolution) license in Dec 2013 and since then
commercialized TD-LTE in different cities of China. The company
desires to become the world’s largest 4G network with 500,000 base
stations that will cover rural and urban China by 2014. At the end
of Mar 2014, total LTE customers reached 2.79 million.
ARPU and MOU
Average Revenue per User (ARPU) per
month was RMB 62 ($10.14) during the quarter. Average Minutes of
Usage (MOU) per user per month during the relevant period declined
20 minutes to 456 minutes.
Peer
Performance
China Unicom Hong Kong
Limited (CHU), China's second largest mobile operator,
reported adjusted net income of RMB 3.30 billion ($540.0 million)
that surged 73.8% year over year. Total revenue (excluding deferred
fixed-line upfront connection fee) for the company climbed 8.3%
year over year to RMB 76.5.0 billion ($12.5 billion) in the first
quarter.
Meanwhile, China Telecom
Corporation Limited (CHA) reported adjusted net income of
RMB 5.5 billion ($900 million), representing a 17.9% rise. Revenues
increased 6.9% to RMB 83.2 billion ($13.6 billion) during the first
quarter of 2014.
Our Analysis
China Mobile will continue to
leverage from its leading position in the Chinese wireless market
owing to strong customer adaptation of its recently launched LTE
service and its expansion will be accretive to the company’s
subscriber growth.
However, we remain concerned about
the drop in quarterly profit and rise in competition. Further,
higher costs to achieve its LTE rollout target can impact its
profitability. China Mobile currently carries a Zacks Rank #4
(Sell).
APPLE INC (AAPL): Free Stock Analysis Report
CHINA TELCM-ADR (CHA): Free Stock Analysis Report
CHINA MOBLE-ADR (CHL): Free Stock Analysis Report
CHINA UNICOM (CHU): Free Stock Analysis Report
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