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China Mobile: A Leader in the Chinese Telecom Services Industry

Increasing adoption of 5G infrastructure and smartphones will drive telecommunications growth globally, especially in China

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Alberto Abaterusso
Aug 26, 2021

Summary

  • The telecommunications industry is predicted to achieve strong growth as technology becomes more accessible
  • Amid Chinese telecommunication services operators, China Mobile is an industry leader
  • The expected increase in the number of wireless mobile and wireline broadband customers will keep on driving margins up
  • The majority of sell-side analysts on Wall Street recommend to buy shares of this stock
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During the Covid-19 pandemic, smartphones and telecommunication services have become of even more vital importance to the functioning of the global economy.

Being able to talk, text, use social media, play online games and otherwise stay in touch with others remotely, from the safety of their own homes, became almost a necessity during the pandemic lockdowns, even for many who didn't previously make much use of these technologies. The work-from-home environment also drove telecommunication sales so that people could more easily connect with co-workers and clients.

Driven by increasing adoption of next-generation technologies such as 5G infrastructures and smartphone devices, the global telecom services industry is estimated to reach a market size of $2.52 trillion in seven years’ time, according to Grand View Research, which will represent a 52% increase from the level in 2020.

The Chinese telecommunications industry keeps on growing steadily, and data from the Ministry of Industry and Information Technology indicates that China has experienced rapid growth in 5G subscribers, as the number of 5G terminal connections rose by 103% to 392 million at the end of July, up from 193 million in January 2020. These numbers seem to indicate that the Chinese telecommunications industry is growing faster than the global average.

Among the Chinese telecommunications giants, China Mobile Ltd (

HKSE:00941, Financial) ranks very high in the sector terms of industrial revenue share and number of mobile phone subscribers. This company has 40% of the industrial revenue share and 58.5% of the total number of mobile phone subscribers.

In the first six months of 2021, the Hong Kong-based telecommunication services provider reported a 6% year-over-year increase in the net profit attributable to common shareholders, reaching $9.14 billion. Operating revenue was also higher at $68.64 billion, up from $61 billion in the corresponding period of 2020. The Ebitda of $25 billion also recorded an increase of 11.2%. These improvements were achieved thanks to a rise in the number of mobile customers to 948 million and wireline broadband customers to 226 million.

The accelerated digital transformation of the economy and the increasing adoption of 5G will continue to drive the company’s profit margins up, providing strong support to the payment of the current semi-annual dividend of 1.63 Hong Kong dollars (about $0.21) per share. This will also increase the likelihood of an additional dividend hike.

The stock was trading at HK$47.85 ($6.15) at close on Thursday. The share price doesn’t seem expensive when compared to the 50-Day Moving Average, which equates to approximately $6.30, or the the 200-Day Moving Average, which equates to $6.50.

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The stock has a market cap of HKD$989.88 billion, a price-book ratio of 0.69 and a price-earnings ratio of 7.32.

The stock price has risen 9.12% so far this year. The 14-day relative strength index of 38 indicates that the stock is neither overbought nor oversold.

Wall Street recommends five strong buy ratings, 16 buys, two holds, one underperform rating and one sell rating for China Mobile.

Disclosure: I have no position in any securities mentioned.

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I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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