Boston, MA 08/19/2014 (wallstreetpr) – Moody’s Investors Service confirmed that China Mobile Ltd. (ADR) (NYSE:CHL)’s rating of Aa3 is in line with its results. The outlook remains stable as China Mobile features strong overall credit profit despite the drop in earnings and higher capex requirements to unveil its 4G services.
The financial figures
China Mobile Ltd. (ADR) (NYSE:CHL) reported revenues of about $53 billion, up 7% year-over-year in 1H2014. The revenues from the data services as a percentage of telecommunication services came at 41% in 1H2014 as compared to 34% in 1H2013. Data services revenues showed a growth of 28%. However, voice services declined 5% year-over-year. The EBITDA margin came at 36.4% in 1H2014 comparable to 40.8% in 1H2013. The strong growth in data revenues was accompanied with the lower margins. It also carried an extra cost in the form of larger handset subsidies for 4G and 3G handsets. The growth in data revenues led to the decline of 4% in EBITDA year-on-year.
The expectations
China Mobile Ltd. (ADR) (NYSE:CHL) expects the EBITDA to drop by a mid-single digit percentage in year 2014. At the same time, Moody’s Investors expects the EBITDA to stabilize in year 2015. It is optimistic on China Mobile’s measures taken for cost controls. It expects the revenues to grow by a low-single digit percentage in the current year and next year. The growth is expected to come from data revenue segment. China Mobile will be in a better position to tackle the new-imposed value-added tax in June 2014.
The cash flow expectations
Moody further expects the costs related with handset subsidies to decline in the coming quarters. The availability of cheaper handsets will help China Mobile to reduce costs. But still the higher capex can result in a negative free cash flow in year 2014 and 2015. The negative figure is expected after the payment of dividend of around RMB45 billion-RMB55 billion in 2014. The cash capex is expected to come around RMB200 billion in 2014 as compared to RMB140 billion in 2013. The cash flow from operations is expected to be around RMB210 billion-RMB220 billion. China Mobile Ltd. (ADR) (NYSE:CHL) will absorb the negative free cash flow with its large amount of cash and deposits
