LowIQinvestor Posted November 23, 2016 Share Posted November 23, 2016 China Mobile (CHL) is the largest wireless telecom network operator in the world with over 800 million subscribers. 60% market share in mainland China CHL is valued at 9 times earnings (ex net cash) $60 B in net cash. (First mover) Competitive advantage due to superior 4G network and coverage ( covers 1.2 billion people) ARPU is about to turn positive due to 4G adoption & increased data consumption (vs voice) Link to comment Share on other sites More sharing options...
LowIQinvestor Posted November 23, 2016 Author Share Posted November 23, 2016 Forgot brief article on recent CHL results: China Mobile Profit Increases 3.1% on Rise in 4G Subscribers https://www.bloomberg.com/news/articles/2016-10-20/china-mobile-profit-increases-3-1-on-rise-in-4g-subscribers Link to comment Share on other sites More sharing options...
johnny Posted November 23, 2016 Share Posted November 23, 2016 ARPU is basically $8-9 USD/mo. Is the expectation that this will somehow climb to western levels as per-capita GDP does? Does the whole industry behave like a rational oligopoly in your opinion? I was surprised to learn that ARPU in some European countries like Germany and Italy is only ~$15. I only bring it up because my reflexive tendency was to assume their ARPU would somehow approach -my- cellphone bill and then I remembered that the US is an extraordinary outlier here. Link to comment Share on other sites More sharing options...
awindenberger Posted November 23, 2016 Share Posted November 23, 2016 ARPU is basically $8-9 USD/mo. Is the expectation that this will somehow climb to western levels as per-capita GDP does? Does the whole industry behave like a rational oligopoly in your opinion? I was surprised to learn that ARPU in some European countries like Germany and Italy is only ~$15. I only bring it up because my reflexive tendency was to assume their ARPU would somehow approach -my- cellphone bill and then I remembered that the US is an extraordinary outlier here. Yeah US customers enjoy overpaying for cell service. Link to comment Share on other sites More sharing options...
rb Posted November 24, 2016 Share Posted November 24, 2016 China mobile is one of the few Chinese companies that I would own since it's highly unlikely that it's a fraud. Their business is good and it's unlikely to face any serious competition future. On the other side it is an SOE so I wouldn't expect them to be very aggressive like an American cable company may behave. I guess the best way to think about it is like a really boring utility. Link to comment Share on other sites More sharing options...
LowIQinvestor Posted November 25, 2016 Author Share Posted November 25, 2016 China mobile is one of the few Chinese companies that I would own since it's highly unlikely that it's a fraud. Their business is good and it's unlikely to face any serious competition future. On the other side it is an SOE so I wouldn't expect them to be very aggressive like an American cable company may behave. I guess the best way to think about it is like a really boring utility. I agree. However, there could be more growth than the market is expecting as they enter adjacent markets ( become a quad play). They just launched broadband products and are knocking the cover off the ball. At 8 or 9 times earning, you get some "free call options" --- if ARPU increases, if broadband continues to grow Low risk, high uncertainty. $15 a share in net cash and pays a 5% dividend. Link to comment Share on other sites More sharing options...
LowIQinvestor Posted November 25, 2016 Author Share Posted November 25, 2016 China Mobile set to double connections by 2020 http://www.mobileworldlive.com/huawei-mbbf16-articles/china-mobile-set-to-double-connections-by-2020/ "China Mobile now has more than 500 million 4G users and accounts for one third of global 4G base stations." Link to comment Share on other sites More sharing options...
johnny Posted November 25, 2016 Share Posted November 25, 2016 What's the history of the cash balance? Seems substantial relative to enterprise value; why is it there? Is it really appropriate to back it out entirely, given the SOE status? Is there a history of acquisitions or interesting capex choices? Could we end up with a Japan-like situation where that cash is just sitting there forever and creating a little ~liquidity management office~ that employs a few dozen nephews and nieces? Link to comment Share on other sites More sharing options...
wachtwoord Posted November 25, 2016 Share Posted November 25, 2016 I owned it a few years ago and sold after it ran up (there are few Chinese companies I would own). Will look again, thanks. Link to comment Share on other sites More sharing options...
LowIQinvestor Posted December 5, 2016 Author Share Posted December 5, 2016 wachtwoord, You're welcome. Would be curious to hear your thoughts on the current valuation given your past familiarity with China Mobile. Below are their 2016 Interim Results Presentation: http://www.chinamobileltd.com/en/ir/webcasts/pre160811.pdf Link to comment Share on other sites More sharing options...
LowIQinvestor Posted December 15, 2016 Author Share Posted December 15, 2016 Tim Cook 11th best-value CEO, behind Alphabet and China Mobile – Bloomberg https://9to5mac.com/2016/12/13/tim-cook-ceo-ranking-bloomberg/ Link to comment Share on other sites More sharing options...
LowIQinvestor Posted December 20, 2016 Author Share Posted December 20, 2016 China Mobile reports 510 mln 4G network users in 2016 ( 30 percent of the world's total 4G network users.) ARPU moving higher http://www.reuters.com/article/chinamobile-outlook-idUSL4N1EF2P8 Link to comment Share on other sites More sharing options...
rb Posted December 20, 2016 Share Posted December 20, 2016 Are you worried about the yuan going down against the dollar? Link to comment Share on other sites More sharing options...
rockket Posted December 20, 2016 Share Posted December 20, 2016 What's the history of the cash balance? Seems substantial relative to enterprise value; why is it there? Is it really appropriate to back it out entirely, given the SOE status? Is there a history of acquisitions or interesting capex choices? Could we end up with a Japan-like situation where that cash is just sitting there forever and creating a little ~liquidity management office~ that employs a few dozen nephews and nieces? Capex spend is huge, and telecom may bear the brunt of government's effort to build out infrastructure/lower pricing. FCF is ~$12bn, so more like ~18x LFCF or 12x UFCF. If you believe prices will continue to fall/capex will continue at current levels, then this may be priced fairly. Link to comment Share on other sites More sharing options...
LowIQinvestor Posted January 3, 2017 Author Share Posted January 3, 2017 Old article but good intro to CHINA MOBILE China Mobile Growth Drivers: 4G And China's 'Internet Plus' http://seekingalpha.com/article/3961210-china-mobile-growth-drivers-4g-chinas-internet-plus Link to comment Share on other sites More sharing options...
shamelesscloner Posted November 23, 2020 Share Posted November 23, 2020 New VIC writeup out for China Mobile. The #1 Chinese telco is trading at 1.6x EV/EBITDA and 405bn Yuan net cash. https://www.valueinvestorsclub.com/idea/China_Mobile/2044967161 For those who have been following CHL for a while, what do you think of the investment case today? Link to comment Share on other sites More sharing options...
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