China Mobile 2008 results

Overview:
China Mobile provides a full range of wireless telecom and value added services in China. It has 70% market share and about 457 million subsribers, which makes it the largest wireless operator in the world.

2008 results:
1. Total revenue up 15.5%

• # of subscribers up 23.8% to 457M, the largest customer base in the world;
• min/ppl/mth up 8.2%, match expectation;
• ARPU down 6.7% to $83, match;
• Mobile service revenue up 12.8%, lower (Instead of $309.8B, the actual result is $279.0B. It is my fault, I've adjusted my analysis process to improve the future estimation)
• Value added service income up 23.8%, match;

2. Reported EPS up 29.7% to RMB$5.64

• EBITDA margin down to 52.5%, match expectation;
• EBITDA up 11.7%, lower (mainly due to my mis-estimate from above);
• Net margin up to 27.4%, due to tax rate cut from 33% to 25%;
• Other operating expenses up 24.2% or $30B, lack of disclosure to tell what is this expenses include (it happened every year)
• Not sure how much is the cost due to natural disasters;

3. Balance Sheet

• Further strengthen its cash position from $188B to $219B, up 16%;
• Fixed assets (include the one in progress) up 19% to 363B;
• Total equity up 18%, keeping at nice pace, no AOCI gain nor loss, which gives us a cleaner balance sheet;
• No cash flow statement, can't analysis its performance in terms of cash (that way I can tell whether the other operating expenses is an art or a science);

Risk:

• Face increase competition in environment;
• Unsymmetrical act against CHL's monopoly position in wireless industry;
• CHL's 3G wireless standard TD-SCDMA is not as mature as China Telecom's CDMA & China Unicom's WCDMA;
• Rise on Capital expenditure on 3G;
• ARPU may further reduce since most of the new subscriber are lower income users from rural market
• Slow down in general economic growth

Comments:

Buy, with Fair Value HK$144.62 (down from $147.48 as of 02/25/09)

Bilibala will prepare the revised analysis after CHL announce its March new # of subscribers result in end of Apr 09.