China Mobile Posts 6% Profit Gain on Strong Jump in 5G Users

(Bloomberg) -- China Mobile Ltd., the world’s largest wireless carrier by subscribers, reported a 6% rise in profit for the first half of this year, boosted by new 5G users and cost-paring efforts.

Net income rose to 59.1 billion yuan ($9.1 billion) for the six months through June, compared with 55.8 billion yuan in the same period last year, according to a statement Thursday. Operating revenue advanced 13.8% to 443.6 billion yuan. The company raised its interim dividend to HK$1.63 a share, compared with HK$1.53 a year before.

The earnings bolster China Mobile’s prospects -- one of the three dominant state-owned mobile operators that were expelled by the New York Stock Exchange earlier this year -- as it seeks a listing in mainland China. While all the three Chinese carriers are focusing on commercial and industrial applications to accelerate 5G revenue growth to recoup their investment, it’s especially crucial for China Mobile which has lagged rivals in adding users.

Key Insights

• China Mobile added 3.6 million users in the first half -- a marked improvement from 2020 when it had lost over 8 million subscribers in the full year. But the gains pale in comparison to 11.5 million new customers lured by China Telecom Corp. and a net addition of 4.6 million subscribers by China Unicom Hong Kong Ltd.
• Shareholders are awaiting details on company’s listing plans in mainland China which received board approval in May. The listing could happen within this year if things go with the plan, Chairman Yang Jie said during a post-earnings call, adding that related works will be on full speed in the second half.
• Robust user growth will be a tailwind here, according to Bloomberg Intelligence’s analyst Anthea Lai. “Their quickening 5G customer gains bode well with their A-share listing plans,” she wrote in a July 21 note.
• Investors will also be keenly looking at the dividend as the carrier’s profit gets a fillip from a faster 5G subscriber net addition in June and cost cutting measures.
  • “The telco’s strong cost control should help limit margin pressure from 5G network and marketing expenses,” Lai wrote in an August 10 note.
• Industrial Internet will likely be the biggest growth driver for the operators over the next five years, Jefferies analysts led by Edison Lee said in a report on July 29. Related businesses include data centers, cloud, 5G-driven information and communications technologies, big data and the Internet of things.
  • China’s spending on information technology may rise by 15% annually over the next five years, Lee said citing research and advisory firm Gartner.

Market Reaction

• China Mobile’s shares closed 0.3% lower Thursday in Hong Kong after the earnings. The stock has surged 14% this year. The benchmark Hang Seng Index has slipped 2.6% in 2021.

Get More

• For more on earnings, read the statement here
• Total mobile subscribers touched almost 946 million, including 251 million 5G customers
• Average mobile monthly revenue per user rose 3.8% to 52.2 yuan in the first half compared to 50.3 yuan a year before
• Operating expenses reached 381 billion yuan, compared with 330.7 billion yuan last year

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