What Is Weighing On China Mobile's Share Price?
May 19, 2014, 12:53 PM
- Goldman's Donald Lu has upgraded China Mobile (CHL +1.9%) to Conviction Buy, and simultaneously downgraded rival China Telecom (CHA -2.7%) to Neutral.
- Lu thinks 3G/4G adoption will boost CHL's data ARPU, and help reverse the decline in its total ARPU in 2015. He adds the arrival of cheaper 4G smartphones (eventually reaching $100 unsubsidized price points) and potentially strong iPhone 6 demand will act as catalysts.
- As for China Telecom, Lu believes a decent amount of good news, including steady earnings growth (wireline-driven) and a tower-sharing deal (will lower capex) has been priced in. He's also worried about possible share loss to CHL as the latter's 4G subscriber base grows.
- Previous: Chinese carriers allowed to set their own prices
May 9, 2014, 5:21 PM
- Starting tomorrow, China's state-run carriers - China Mobile (CHL), China Unicom (CHU), and China Telecom (CHA) - will be able to set their own service prices without having to first clear them with the government (as has been the case thus far). The policy change covers voice, text, and broadband services.
- Nonetheless, the carriers will still be prohibited from offering "excessive" discounts. The regulatory change is part of a broader effort by the Chinese government to let market forces determine prices.
- It follows two moves from regulators that could pressure the carriers' bottom lines: The imposition of a telecom VAT, and the issuing of MVNO licenses to Alibaba and ten other firms.
Apr. 22, 2014, 1:01 PM
- China Mobile (CHL -0.5%) had Q1 revenue of RMB154.8B ($24.8B), +8% Y/Y and above a Bloomberg consensus of RMB142B. But 4G network investments and iPhone subsidies led net income to come in at RMB25.2B ($4B), -9% Y/Y and below a consensus of RMB27B.
- The world's biggest carrier saw its customer base grow by 13.9M in Q1 to 781.1M. 3G subs grew by 33.4M to 225M, and 4G subs totaled 2.79M at quarter's end (services were launched in December).
- Mobile messaging competition (most notably from Tencent's WeChat) led SMS activity to fall 20% Y/Y to 192.7B messages. Voice usage rose fractionally to 1.04T minutes, and mobile data traffic (not including Wi-Fi) grew 83% to 190.1B MB.
- Going forward, a telecom VAT and competition from MVNOs might also pressure CHL's bottom line.
Mar. 27, 2014, 7:13 AM
- Alcatel-Lucent (ALU) has forged a one-year comprehensive frame agreement worth up to €750M to provide China Mobile (CHL) with technology that will enable the latter to move to an all-IP ultra-broadband network.
- The deal includes 4G TD-LTE technology, and will pave the way for "future network functions virtualization (NFV) and cloud-based services."
- Alcatel-Lucent's shares are +6.2% premarket.
Mar. 21, 2014, 9:54 AM
- A day after selling off due to a soft Q4 report, China Mobile (CHL -2.5%) is being pressured by a downgrade to Neutral from HSBC.
- The world's biggest mobile carrier had already been selling off in 2014 due to worries about a telecom VAT, MVNO competition, and the impact of Web-based messaging services.
Mar. 20, 2014, 1:58 PM
- The disclosure comes from China Mobile (CHL -2.6%) CEO Li Yue following the carrier's Q4 report. Chairman Xi Gouhua says China Mobile added 1.34M 4G subs in February, and that "most of them" were iPhone (AAPL -0.3%) users.
- Piper's Gene Munster calls the iPhone number "a disappointment," but remains optimistic about the long-term opportunity. Credit Suisse says the number is in-line with its views, and chalks it up to high prices and 4G network quality issues. Cantor's Brian White is counting on the arrival of bigger iPhones later this year to boost China Mobile sales.
- China Mobile began selling the iPhone on Jan. 17, after commencing pre-registrations on Christmas. 1.2M pre-registrations had been tallied by Jan. 15. Street estimates for the carrier's 2014 iPhone sales have ranged from 10M to 20M+.
- China Mobile's had 776M mobile subs as of Feb. 28. But a large portion of them can't afford the $700+ prices attached to unsubsidized Chinese iPhone 5S/5C sales. 2013 ARPU was only RMB67 ($10.75).
Mar. 20, 2014, 2:44 AM
- China Mobile's (CHL) net profit fell for the first time in 14 years in 2013, dropping 5.9% to 121.7B yuan ($19.6B) as the company increased infrastructure spending and handset subsidies. Free mobile-messaging services also hurt income.
- Revenue climbed 8.3% to 630.18B yuan.
- As of February 28, China Mobile had 775.6M customers.
- China Mobile intends to increase capital expenditure 22% to 225.2B yuan ($36.34B) in 2014 as the operator looks to bolster its high-speed 4G network. (PR)
Mar. 11, 2014, 2:54 PM
- BrightWire and Marbridge Consulting report China Mobile (CHL -0.6%) has told its phone suppliers all 4G phones provided from May onwards must support five air interfaces - 4G TD-LTE and FDD-LTE, 3G TD-SCDMA and W-CDMA, and 2G GSM. Currently, OEMs can get away with supplying phones supporting only the three interfaces used by China Mobile - TD-LTE, TD-SCDMA, and GSM.
- The move could benefit baseband chip giant Qualcomm (QCOM -0.4%), given the company's expertise in supporting a huge variety of air interfaces and frequency bands. That is, provided the Chinese government's antitrust probe doesn't get in the way.
- Strategy Analytics estimates Qualcomm, buoyed by a dominant 4G baseband position (97% share as of Q1 2013), had a 64% 2013 baseband revenue share. But competition is intensifying: Intel, Broadcom, MediaTek, and Nvidia are all in the midst of launching 4G baseband parts.
- Last November, Qualcomm announced the Gobi 9x35, a next-gen 4G baseband that offers theoretical max speeds of 300Mbps (2x its predecessor) and supports six air interfaces.
Mar. 5, 2014, 6:06 PM
- After growing ~60% in 2013 (and fueling global shipment growth of 39%), IDC expects Chinese smartphone shipment growth to slow to ~20% in 2014 and just ~10% in 2015.
- Though only 40% of China's 1B+ mobile users now use a smartphone, IDC's Kiranjeet Kaur notes most users who can comfortably afford a smartphone have already bought one. Plunging low-end Android prices could expand the addressable market in a country whose nominal per capita GDP is around $6K.
- India, which has a sub-10% smartphone penetration rate, still presents a major growth opportunity. But with a nominal per capita GDP of ~$1,500, the country is even more cost-sensitive than China.
- With China slowing down and developed markets living up to their name, IDC expects global smartphone growth to slow to 19% in 2014; that still spells total volumes of 1.2B. Tough competition and the ongoing mix shift towards emerging markets is expected to lead the industry's ASP to fall $27 to $308.
- Smartphone OEMs with strong Chinese exposure: AAPL, SSNLF, LNVGY, ZTCOY
- Chip suppliers: QCOM, BRCM, CRUS, SWKS, RFMD, MRVL
- Chinese carriers: CHL, CHU, CHA
Mar. 5, 2014, 9:19 AM
- The imposition of a value-added tax (VAT) , part of a broader tax reform push by the Chinese government, is expected to hurt the bottom lines of China Mobile (CHL), China Unicom (CHU), and China Telecom (CHA).
- The announcement comes less than three months after the government issued MVNO licenses to 11 companies (inc. Alibaba) looking to offer mobile services using the networks of incumbents, and at a time when voice/SMS revenue streams are already being pressured by mobile messaging apps (most notably Tencent's WeChat).
- Bernstein's Chris Lane thinks China Mobile's net profit could be hurt by 7%, and Unicom and Telecom's net profit by 25%, assuming an 11% VAT replaces a current 3% business tax.
Jan. 17, 2014, 4:59 AM
- Apple (AAPL) has finally launched the iPhone on China Mobile's (CHL) massive network, but despite the carrier's 763M subscribers, skepticism exists about how much the companies will benefit.
- "You need to consider the cannibalization of (iPhone) sales from China Unicom (CHU), China Telecom (CHA) and the grey market," says Gartner analyst CK Lu. "So even though there's an addition from China Mobile, it will also impact sales from other channels as well."
- As for China Mobile, there are concerns about subsidies it might have to pay. "I don't see a price war coming where Apple is engaged in the war, but I do think you're going to see a subsidy war coming," says Michael Clendenin of Shanghai-based RedTech Advisors.
Jan. 15, 2014, 3:55 AM
- China Mobile (CHL) received 1.2M pre-orders for iPhone devices by Monday, indicating the level of demand for the product ahead of its sales launch by the carrier on Friday.
- Speaking in China, Apple (AAPL) CEO Tim Cook said that even without an official agreement with China Mobile, iPhone sales hit a record high in Greater China in Apple's FQ1. In FQ4, it generated revenue of $5.73B.
- The firms expect the iPhone deal between the companies to lead to broader co-operation. "There are lots more things our companies can do together," Cook said.
Jan. 13, 2014, 2:03 PM
- iPhone/iPad power management IC supplier Dialog Semi (DLGNF), which receives over 70% of its sales from Apple (AAPL +1.2%), has reported preliminary Q4 revenue of $352M (+31% Y/Y). That handily beats prior guidance of $310M, which itself was above a previous forecast of $270M-$295M. Shares rose 7.4% in Frankfurt.
- Apple is trading higher following Dialog's announcement, as is Cirrus Logic (CRUS +2.8%), a chipmaker just as dependent on Apple as Dialog.
- Dialog's numbers are overshadowing a downbeat note from Cleveland Research regarding early China Mobile (CHL -0.8%) iPhone demand. Cleveland says its checks point to disappointing China Mobile pre-registrations, and lead it to think the carrier will sell only 10M iPhones in 2014 (below peer estimates of 15M-30M).
- Wedge Partners has also provided cautious commentary about China Mobile's iPhone pre-registrations. The world's biggest carrier begins selling the iPhone on Friday.
Dec. 26, 2013, 2:54 PM
- The Chinese government has issued licenses (translation) to 11 companies looking to offer mobile services via MVNO arrangements with incumbents China Mobile (CHL -0.2%), China Unicom (CHU -0.7%), and China Telecom (CHA). Chinese e-commerce giant Alibaba is among the companies receiving a license.
- Though the incumbents will receive service fees from MVNOs, the licenses set the stage for China's mobile services market to see its first major jolt of new competition in years. The market's last major shakeup arguably happened in '08, when China Telecom (originally focused on wireline services) struck a deal to purchase China Unicom's 2G CDMA network.
- The licenses arrive shortly after the Chinese government slashed the interconnection fees China Unicom and Telecom have to pay China Mobile (by far the market's biggest player). All three carriers have seen their voice/text revenues pressured by the rise of mobile messaging services, particularly Tencent's WeChat.
Dec. 26, 2013, 7:06 AM
- China has approved a pilot scheme that will allow 11 private "virtual carriers" to sell mobile phone services using the infrastructure of the country's dominant operators, China Mobile (CHL), China Telecom (CHA) and China Unicom (CHU).
- "It's a milestone," says the Ministry of Industry & Information Technology. "It will draw private investment, and stimulate competition and innovation in the telecoms sector," giving "consumers greater choice and better service."
- The 11 companies to receive permits include Net.cn, a unit of online retail giant Alibaba.
- ETFs: CHIQ, CQQQ, QQQC, KWEB
Dec. 22, 2013, 5:33 PM
- It finally happens: Apple (AAPL) announces it has entered into a multi-year deal with China Mobile (CHL) to offer the iPhone to China Mobile's 760M subs. The iPhone 5S and 5C will be available via China Mobile's retail network, as well as Apple's Chinese stores, on Jan. 17. Pre-registrations start on Christmas. (PR)
- Importantly, the phones will work on both China Mobile's new 4G TD-LTE network (just coming out of trial mode), and its existing 3G TD-SCDMA network. Either network would offer a major speed improvement for the tens of millions of existing China Mobile iPhone users currently forced to rely on 2G connections, provided they upgrade.
- Analyst estimates for incremental first-year iPhone sales have ranged from less than 10M to as many as 24M, and estimates for the 2014 EPS benefit have often been in the $2-$4 range.
- While China Mobile's giant subscriber base and retail reach translate into a major growth opportunity, its low ARPU and the popularity of cheap and large Android phones in China will act as headwinds. Whereas the iPhone 5C starts at an unsubsidized price of ~$735 in China, app analytics firm Umeng estimates Chinese Android phone sales carry an average unsubsidized price of just $233.
- More on Apple/China Mobile
China Mobile Ltd. operates as an investment holding company, which through its subsidiaries provides telecommunications services in Mainland China. The company was founded on September 3, 1997 and is headquartered in Hong Kong.
Industry: Wireless Communications