WSJ Tech Center: China Mobile Stock Extends Its Slide Despite Profit Surge
April 10, 2001
By H. ASHER BOLANDE
Staff Reporter of THE WALL STREET JOURNAL
HONG KONG -- China Mobile (Hong Kong) Ltd. said net profit more than tripled last year, but that isn't expected to break the downward spiral in the company's stock price, which has been battered by global market skittishness about the wireless industry's future.
The company -- the second-largest in the world by subscriber total, after Vodafone PLC of Britain -- said net profit surged to 18.03 billion yuan ($2.18 billion) last year from 4.8 billion yuan in 1999, in line with analysts' forecasts. The figure included the performance of seven new provincial subsidiaries acquired in November from China Mobile's parent company.
Driving the growth was an increase of 19.4 million in the number of China Mobile subscribers, to 45.1 million.
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China Mobile's stock, however, has tumbled as investors focus on uncertainties in the country's mobile sector -- such as the prospects for expanded competition, or new pricing plans -- and ignore the strong earnings. China Mobile's only rival, China Unicom Ltd., saw its stock plunge anew last week despite announcing profits that more than doubled analysts' expectations, adding to a sense that the country's mobile sector is caught in the grip of larger forces, analysts said.
"We are in a momentum mode right now," said Rohit Sobti, the head of regional telecommunications research at Salomon Smith Barney. "The markets are going down, and the sector's going down."
China Mobile shares dropped 1.8% Monday to 32.40 Hong Kong dollars (US$4.15), down 60 Hong Kong cents, in trading on the Hong Kong exchange. The stock has shed more than a third of its value since early February.
China Mobile's chairman and chief executive, Wang Xiaochu, acknowledged he is feeling the pressure from the low stock price, but appeared confident in urging investors to look more closely at his company's situation.
Unlike in North America, where an economic downturn is a worry, China's economy is expected to grow more than 7% this year, he noted. Likewise, the "prudent" wait-and-see approach the country's operators have taken toward third-generation networks means they aren't exposed to risks like disappointing delays in the technology or the multibillion-dollar license fees paid by some operators in Europe, he said.
"Investors should be able to see these differences," said Mr. Wang. "One cannot apply one type of standard across an industry, or apply one type of standard in different countries."
China Mobile also said operating revenue rose 68% to 64.98 billion yuan from 38.62 billion yuan. Taking into account a write-off of the company's obsolete analog network announced last week, diluted earnings per share rose to 1.25 yuan from 40 fen.
Average revenue per subscriber fell 25%, in line with forecasts. Mr. Wang said that as long as subscriber growth remains robust, it isn't necessarily a bad thing for the per-subscriber revenue figure to fall so fast.
The company's per-subscriber Ebitda -- or earnings before interest, taxes, depreciation and amortization, a standard measuring tool in the industry -- was still high by international standards, exceeding those of companies like AT&T Wireless and Vodafone.
Vodafone holds a 2% stake in China Mobile.
Write to H. Asher Bolande at hyam.bolande@awsj.com4 .
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