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China Mobile Ltd 00941

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Morningstar’s Analysis

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Ceasing Coverage of Chinese Telecom Operators’ ADS; HK Listings Remain Very Good Value

Dan Baker Senior Equity Analyst

Analyst Note

| Dan Baker |

Given the New York Stock Exchange’s plan to de-list the U.S. listings of China Mobile, China Telecom and China Unicom, we cease coverage of their associated ADS. We retain our fair value estimates of HKD 82 for narrow-moat rated China Mobile, HKD 4.54 for no-moat rated China Telecom and HKD 10.90 for no-moat rated China Unicom. All three stocks are trading well below these target prices with recent share price weakness likely exacerbated by forced selling from U.S. investors. There may also still be some short-term overhang on the Hong Kong listings as the U.S. investment constraints may lead to some funds and ETFs reducing their Hong Kong exposure as well. We reiterate our view that the delisting of the ADS will have negligible impact on the operations of the Chinese telecom companies or their underlying value. Trading on 2021 price/earnings ratios of between 6 and 8 times and with dividend yields of between 5% and 8%, as well as growing earnings solidly despite heavy near-term spend on 5G infrastructure, we see each of them as very undervalued. We see the forced selling as a buying opportunity for non-U.S. investors.

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Company Profile

Business Description

China Mobile is not only the largest telecom operator in China by the number of mobile subscribers (946 million), but also the largest in the world. It has 59% of the total wireless market in China and also has 44% of the fixed line broadband market. The firm is also now continuing to roll out its 5G network, having launched 5G service in late 2019. It will be doing some 5G network sharing with China Broadcasting Network at 700 MHz and will also resell its 2G/4G/5G network through China Broadcasting Network.

99 Queen’s Road Central, 60th Floor, The Center
Hong Kong, Hong Kong
T +852 31218888
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Dec 31, 2007
Fiscal Year End Dec 31, 2020
Stock Type
Employees 456,239