Event: China Mobile and China Telecom reported 3Q09 results.
China Mobile (941)’s 3Q09 earnings up 2.6% yoy to RMB 28.6bn, in-line with market consensus. 1H09 net
profit increased 1.4% yoy. Revenue grew 9.0% yoy in 3Q09 despite a 3.9% yoy decline in ARPU to RMB74.6.
MOU up 0.8% yoy to 490 as a result of higher portion of low usage customers. Blended revenue per minute
decreased 8.6% yoy due to intensified competition. EBITDA margin was the same as 2Q09 ’s 50.7%.
While 3Q09 results were broadly in-line, September net adds improved to 5.43mn (Aug 09: 5.26mn) thanks to
continuous economic recovery. 3G net adds were still very weak at 328k, however.
We believe CM will be lack of growth prospect from now on amid increasing competition and saturating highend
market. Nevertheless, CM is defensive for its strong net cash ($12.5 per share as at end-Jun) and stable
business. At 12.0x 2010 PER, valuation has fully reflected company’s fundamentals, in our view. We maintain
HOLD on CM with target price slightly revised down to $80.0, representing 12.0x 2010 PER. We recommend
investors to accumulate the stock when forward dividend yield reaches 4.0%, suggesting an entry point of
$75.0.
China Telecom (728)’s 3Q09 earnings declined 47% yoy to RMB 2.98bn that were worse than market
consensus. Revenue increased 16.1% thanks to the CDMA business incorporated in 2009. It however rose only
1% qoq that was mainly due to poor fixed line operation. CDMA MOU and ARPU up 37% and 31% to 329 and
RMB 64 respectively, reflecting the increasing popularity of its CDMA2000 services.
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