China Mobile (CHL) beats revenue and profit estimates on subscriber and new market growth, stock up (FY2004 earnings)

Includes: CHA, CHL, CHU, CN-OLD
by: Ezra Marbach

China Mobile (ticker: CHL), China's largest mobile phone operator, announced (WSJ subscription required) Q4 and FY2004 results today. Here are key points including comments on 3G licensing, and more on the company's new growth channel:

2004 Results:
(all percentage changes and comparisons are year-over-year, unless stated otherwise)

  • Revenue increased 21.3% to $23.2 billion.
  • EBITDA increased 16.2%.
  • Net profit rose 18.1% to $5.1 billion, beating analyst estimates of $4.9 billion.
  • Added 38.18 million GSM subscribers in 2004.
  • Total subscribers through 2004 were 204.29 million.
  • Market share was unchanged at 64%.
  • Average revenue per user (ARPU)
    fell to 92 yuan in 2004 from 99 yuan in 2003. (ARPU is a standard measure of
    sales in the cellular industry).
  • Will pay a dividend of 46 Hong Kong cents a share. Together with a 20 cent first half dividend, that brings
    the company's full-year dividend per share in 2004 to 66 cents.
  • Earnings from newly acquired units in rural provinces exceeded company
    expectations. Profit rose to 3.79 billion yuan in 2004, compared with estimates of 3.12 billion yuan.
  • In 2H 2004, the company's provincial networks increased to 31, after the company completed
    the purchase of 10 networks from its parent, China Mobile
    Communications for $3.65 billion.

Q4 Results:

  • Revenue increased to 54.6 billion yuan beating estimates of 52.8 billion yuan.
  • Net income increased to 13.1 billion yuan beating estimates of 11.1 billion yuan.


  • China Mobile Communications, China Mobile's parent, is in the final round of bidding for a stake in Pakistan Telecommunication, Pakistan's biggest state-owned fixed-line and mobile operator. China Mobile Communications is seeking a 26% stake, with voting rights of 58%, giving it management control.
  • China Mobile officials met Vodafone (ticker: VOD) executives in
    Tokyo last month, signing an agreement to share equipment suppliers for 3G networks.
  • China Mobile bought 10 networks from its state-owned parent for $3.65 billion in April, exposing it to more rural areas. The networks are in the northern provinces of Ningxia, Jilin, Gansu, Heilongjiang and Inner Mongolia, the southern provinces of Yunnan and Guizhou, and Qinghai, Xinjiang and Tibet in the west.
  • The company does not believe that a mobile price war will begin anytime soon.

On 3G licenses:

  • The company said it is "actively preparing" for 3G
    mobile phone services as the Chinese government is expected
    to issue 3G licenses this year.
  • The company will increase its budgeted 2005 capital expenditure of $7.8 billion, if it wins one of the 3G licenses.
  • China Mobile does not know if it will receive a 3G license. The government is studying the suitability of issuing either three or four 3G licenses.
  • Fixed-line operators are potentially getting licenses, which could change the dynamics of the industry.

Market Statistics:

  • China is the world's largest telecom market by
  • 340 million mobile users at the end of January.
  • China Mobile and China Unicom (ticker: CHU) have a combined 321 million
  • Mobile penetration rate in China is 25.9%.
  • China
    Mobile added 3.24 million subscribers in January 2005, 30% more than
    in January 2004, bringing its total to 207.5 million.

Quick thought: China Mobile's growth in rural areas is noteworthy. With urban subscriber growth slowing, carriers have had to look to more budget-conscious consumers in smaller cities. China Mobile is subsidizing handsets
and lowering call rates to target the 900 million people living outside
cities. China Mobile and China Unicom are also reportedly preparing new campaigns in the weeks ahead to lure customers from cheap, basic wireless services offered by the two fixed-line carriers.

The rural subscriber growth should be especially reassuring for investors because China Mobile may have to contend with fixed-line carriers including China Telecom (ticker: CHA) gaining
cellular licenses in the near future.   

See China Mobile's January results here. See the company's earnings results announcement from its web site here.

China Mobile's stock market performance: