China Mobile Ltd. – Lead in 5G construction January 9, 2020 526

  • China Mobile obtained 260MHz of spectrum in the 2.6GHz and 4.8GHz bands.
  • China Mobile released the SPN equipment procurement project for 2020 and 2021
  • We are positive on China Mobile mainly due to its leading positions and progress in 5G construction. China Mobile currently trades at P/E of 11.5 and P/B of 1.3.

 

Company Description:

China Mobile is a Chinese state-owned company. China Mobile Limited provides mobile voice and multimedia services through its nationwide mobile telecommunications network across mainland China and Hong Kong.

China Mobile Limited is listed on both the NYSE and the Hong Kong Stock Exchange. It is the largest mobile telecommunications corporation by market capitalisation, and also the world’s largest mobile network operator by the total number of subscribers, with over 942 million subscribers as of September 2019. As of 2020, China Mobile Limited’s total market value stood at RMB 1.31 trillion.

 

Why we like China Mobile:

  1. China Mobile and its competitors have been offering 5G since the end of October 2019. For 5G spectrum destruction, China Telecom and China Unicom, which are partnering to jointly deploy 5G, received 100MHz in the 3.5MHz band, while market leader China Mobile obtained 260MHz of spectrum in the 2.6GHz and 4.8GHz bands.

Comments: Although 3.5MHz band product has more matured technology and better international collaboration, China Mobile already has a large number of TD-LTE equipment at 2.6GHz, which will make China Mobile lead in 5G construction with less additional investment and engineering time.

Meanwhile, with the holding of 4.8GHz bands (High-frequency bands), China Mobile will be further benefited from 5G technology development in the future and maintain its leading position.

  1. On December 29th, 2019, China Mobile released the SPN equipment procurement project for 2020 and 2021: The project involves 28 provinces, and the procurement scale of SPN equipment reaches 145,663.

Comments: 5G network construction starts from base station construction. The purchase of SPN equipment shows the demand for equipment upgrading and progress in 5G infrastructure construction. 

According to MIIT, as of December 23, 2019, 5G base stations in China has reached 126,000; and by the end of 2020, 5G signal should cover most of the cities in China.

Summary: As a leading operator in China, we believe that China Mobile will surpass China Unicom and Telecom’s 5G combined network in coverage and attract more early adopters of 5G services. Accroding to China Mobile, more than 10 million have pre-registered for 5G. The 5G will also help increasing China Mobile’s ARPU, 5G services’ ARPU reach more than RMB 100 comparied to China Mobile’s Mobile services APRU RMB 50.2 for the first three quarters of 2019.

 

Recommendation:

We are positive on China Mobile mainly due to its leading positions and progress in 5G construction. We belive  China Mobile currently trades at P/E of 11.5 and P/B of 1.3.

 

Technical Pulse:

China Mobile (HK: 941) downtrend have seen a light in a tunnel and recent technical indicate that the stock may head into a bullish rally soon:

  1. Price has broken out of the falling wedge formation.
  2. Morning Star formation at the lower band of the Bollinger is the key for a strong bullish conviction.
  3. Expect some retracement back to the demand area for a strong rally.
  4. Strong supply region coincides with the resistance level at 67.70.

 

*This call is valid only for 4-5 weeks.

 

CHART LEGENDS

Bollinger Bands

Red dotted line = Upper Band

Blue dotted line = Middle Band

Green dotted line = Lower Band

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