China Mobile Ltd. (ADR)(NYSE:CHL) Misses Consensus Estimates, 4G Business Brings Profit, 2G & 3G Remain Sluggish

  1. Reported below consensus estimates financial results.
  2. Its 4G business remained profitable in September quarter; however, 2G and 3G faced loss.
  3. Guidelines regarding service revenues have been downgraded, whereas 4G revenues have been upgraded.

China Mobile Ltd. (ADR)(NYSE:CHL) announced financial results for the recently concluded 3Q2015. It faced many ups and downs during the quarter, and couldn’t beat the consensus estimates. Additionally the telecom network business faced many challenges. It attained profitable position only in 4G segment; 2G and 3G witnessed negative growth. Based on the financial results, China Mobile Ltd. revised its yearly guidance.

3Q Financial Results At A Glance

China Mobile’s service revenues grew by a decent margin of 1.1% on YOY basis and touched RMB147.8 billion level on the back of 44.3% growth in EBITDA margin. Total revenue for the quarter touched a respectable figure of RMB172bn, up 9.9% on YOY basis. It was 2.2% shorter than the consensus estimates, which got the attention of many experts. China Mobile reported total EBITDA of RMB65.5 billion in 3Q2015, up 12.8% on YOY basis; however, it fell 0.6% shorter than consensus estimates.

When it comes to net profit, it reported whopping RMB28.2 billion net profit, 13.3% higher than the net profit reported by the company during the same three-month period in 2014. Although, the profit looked promising, it fell 6.9% short of consensus estimates.

The primary reason behind this performance can be the top-line growth of the company, which remained weaker than the expectations throughout the quarter. Total mobile data traffic for the quarter was as much as 734 billion MB, 146% higher than the data traffic reported during the same three-month period in 2014. When compared to the data traffic reported by the company during the previous quarter, it managed to grow by 23.6 percent.

Operating Results & Performance in 2G, 3G, and 4G Segments

The operating numbers reported during the quarter were quite varied. It added a total of 2,761K subscribers during the September month, which were 101.5% higher than the subscribers added during the previous month. However, this addition in subscribers was 10.6% lower than the subscribers added by the company during September 2014.

When it comes to 4G segment, it reported a net addition of 18.4 million, down 10.3% from the previous month. However the monthly trailing average net addition for the month was 17.5 million, 7.7% higher than the number estimated by the company previously. In terms of accumulated growth in the number of 4G subscribers, China Mobile reported 247.6 million subscribers, 30.1% of total ending subscribers.

Its 3G segment couldn’t repeat the performance of 4G segment as the net loss amounted to 7.4 million compared to net addition of 2.2 million during September 2014. The average trailing net loss for the month was 5.6 million as compared to the previously estimated figure of 3.7 million net loss. Accumulated 3G subscribers at the end of the quarter reached to 195.3 million, 23.7% of total subscribers.

Company’s performance in 2G segment was no different from 3G segment. The net loss for the September month was 8.2 million against the net loss of 11.8 million in August. In September 2014, China Mobile reported a net loss of 10.5 million in the 2G segment. The monthly trailing average loss for the September month was recorded as 10.1 million against the estimates of 10.5 million net loss.

Yearly Revisions On The Back of Financial And Operational Results

The total service revenue for FY2015E/16E has been revised by negative 1.4%/0.8% due to lower blended ARPU. As the 4G segment performed well in September month, China Mobile raised the estimated annual subscribers edition to 215 million. It didn’t make any changes in the wireless net edition of 25 million for the year. The company has also decided to raise the net profit guidelines for FY2015 by 10 percent.

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