C114 communication network 99
C114 Beijing time, Feb. 10 (Jiu) CITIC Securities recently reported that China Mobile is the world's largest and best performing technology company in terms of cash performance. Through DCF (discounted cash flow) and EV / EBITDA (enterprise value multiple) valuation, China Mobile (00941. HK) was rated as "buy" with a key recommendation, with a target price of HK $89-104 (current share price of HK $67.3). CITIC Securities pointed out that as a leading global telecom operator, China Mobile will usher in the highlight moment in the 5g era.
5g user driven revenue will usher in revenue turning point
Statistics show that by the end of 2019, China's mobile subscribers have reached 950277 million, 4G subscribers have reached 758014 million, and cable broadband subscribers have reached 18704.1 million. A large number of users can not do without the support of the network. In the past decade, China Mobile has built more than 4 million mobile base stations in China, including 2.41 million 4G base stations. At present, China Mobile is making every effort to build 5g network, has built more than 55000 5g base stations nationwide, and provides 5g commercial services in 50 cities.
On the income side, in the first half and third quarter of 2019, under the influence of multiple factors such as the decline of population dividend and the rapid release of flow dividend, China Mobile's revenue and profit continued to "double drop". In order to recover the decline, while continuing to expand the scale of users, the three major domestic operators began to return to rationality from the crazy "mutual harm" mode, and successively cancelled unlimited packages of traffic. After years of "seizing cultivation" of fixed network broadband market, "free lunch" was cancelled, and initial broadband installation fee was levied to obtain benefits from service quality.
According to the development track of 5g, 2019 will be the first year of 5g, 2020 will be the year of 5g development, and 2021 will be the year of 5g outbreak. GSMA predicts that in 2020, the number of 5g users in the world will exceed 170 million, while China Mobile's "small goal" in 2020 is to strive for the development of 150 million 5g package users. CITIC Securities pointed out that under the premise of slowing competition and the rapid growth of 5g users in the mainland, China Mobile's revenue will be significantly boosted, and in 2021, it will "usher in a turning point of revenue".
5g capital expenditure moderate growth profit release more secure
In terms of frequency band, 3.5GHz is the most widely used 5g frequency band in the world, which is used in China, Japan, South Korea and some countries in Europe. Similarly, the network deployment and application around 2.6GHz and 4.9ghz are also moving forward rapidly.
2.6GHz main frequency band has strong network coverage capacity, and 4.9ghz frequency band is flexible to use. It can be used not only for network capacity and coverage supplement, but also for vertical industry to meet its business needs on demand. Meanwhile, China Mobile has the above-mentioned three frequency band resources.
"China Mobile 5g will build a network of the same scale or save more than 40% of the investment compared with its competitors through the development of 4G in the second round." CITIC Securities pointed out that "China's mobile capital expenditure will grow 'moderately', with a compound growth rate of 5g investment of about 8% in the next three years, and then the capital expenditure will decline."
China Securities also pointed out that China Mobile will take more strict cost control measures. Through sorting out typical subjects, the company's sales expenses and terminal subsidy expenses may be reduced by 10 billion yuan this year. In addition, the increase of power consumption brought by the increase of 5g base station energy consumption will also become a controllable factor through technical means.
Benefit from the number carrying network to occupy the competitive advantage
On November 27, 2019, the Ministry of industry and information technology announced the official launch of the national service of "carrying number to transfer network". The official hasn't released the data of number carrying and network transfer up to now. According to the statistics during the trial operation of number carrying and network transfer in 26 provinces from November 10 to 26 last year, China Mobile has 36413 users and 6248 net users, which is the highest among the three operators; the carrying out rate is 0.003%, which is the lowest among the three operators.
2020 will be the beginning of the real strength of the network. CITIC Securities expects China Mobile to be the biggest beneficiary of the network policy.
In the case of tariff convergence, network coverage and service quality are the key to the network transfer. There is no doubt about China Mobile's ability in network coverage. In terms of rights and services, China Mobile once held a media exchange meeting at the beginning of the year, saying that in 2020, it will rely on its exclusive products, rights and services to attract 20 million users to join global communication, 30 million users to join mobile zone and 100 million users to join Shenzhou travel. And lead 5g package through 5 rights and interests: increase network rights, service rights, brand rights, membership rights and business rights (5g play package), focus on 4K live broadcast, online music, VR / AR, travel, e-commerce and other fields, and create a "strong magnetic field" of high-quality head rights and interests.
CITIC Securities comprehensively analyzed the advantages of China Mobile in the revenue end, expenditure end and competition end, and recently rated and recommended it. Interestingly, Morgan Stanley has also published a report to update the bank's list of focus stocks in the mainland and Hong Kong markets, including China Mobile (00941) and GAC (02238). Morgan Stanley pointed out that driven by 5g, China Mobile's ARPU value is expected to increase, and its dividend compound growth rate from 2019 to 2022 is expected to reach 5%.