China Mobile’s earnings rose by 3%, expected to be reduced by more than 10%, and the stock price fell 4.7%.

China Mobile (00941) announced that its profit rose 3.1% last year to 117.78 billion yuan, which was expected by the market, but the final interest rate decreased by 12% to 1.391 yuan, taking into account interim dividends. The annual dividend was 3.217 yuan, a slight increase of 0.4%. The dividend payout ratio rose to 49%. Some brokers are disappointed with this and are more worried about the slowdown in their dividend payout.

Li Yue, CEO of the group, stressed that the current dividend payout ratio can balance shareholder returns and 5G investment demand, emphasizing that the ratio has not peaked, and will strive to return shareholders in the future based on operating and cash conditions. China Mobile’s share price rushed after the announcement of the noon results, closing at 83.1 yuan, down 4.7%.

Investment of 149.9 billion yuan, not counting 5G

Morgan Stanley pointed out that China Mobile’s dividend payout ratio is slightly lower than the market expectation of 50%, and no special dividend has been paid. In particular, the bank mentioned that China Mobile’s latest dividend distribution guideline is “The company will maintain a stable dividend payout ratio for 2019”, and delete the words that the dividend payout ratio will be “stable and rising” in the previous year. The bank maintains a “Reduce” rating for China Mobile with a target price of RMB 70.

Regarding the dividend payout ratio that did not meet market expectations, Li Yue responded that “the management hopes to have a greater return to shareholders, but considering the dividend payout ratio of similar, same-scale and same companies, the current dividend payout ratio of 49% is appropriate. To ensure the effective return of investors and to leave considerable capacity for the future development of 5G.”

China Mobile’s capital expenditure budget for this year is 149.9 billion yuan, which does not take into account the 5G trial commercial investment. Chairman Yang Jie explained that there is no timetable for 5G licensing in the Mainland, so it is difficult to clarify the capital expenditure of 5G, but even taking into account the capital expenditure of 5G trial commercials during the year, the overall capital expenditure this year will still be lower than last year’s 167.1 billion yuan. Level. Brokerage Deutsche Bank estimates that China Mobile’s capital expenditure for 5G this year is about 10 billion yuan, which is higher than China Unicom (00762)’s 6 billion to 8 billion yuan, and China Telecom (00728)’s 9 billion yuan.

Yang Jie also mentioned that it plans to use 5G for commercial scale next year, and believes that the peak of 5G investment will be in the next year. When asked whether there will be more support for Chinese equipment suppliers such as Huawei in the procurement of 5G equipment, he said that the Group treats Chinese or foreign equipment suppliers equally and screens them according to fair and open bidding procedures.

Competition is strong this year, ARPU is afraid to fall again.

Last year, China Mobile’s EBITDA (earnings before interest, tax, depreciation and amortization) was 275.54 billion yuan, up 1.9%; earnings per share were 5.75 yuan, up 3%. During the period, cable broadband customers reached 157 million, a net increase of 44 million per year; mobile phone customers reached 925 million, an annual number of 37.87 million. The ARPU of the personal mobile service (average revenue per household per month) fell by about 8% year-on-year to 53.1 yuan. Li Yue expects that due to the impact of speeding up and industry competition, this year’s ARPU will continue to have a chance to decline, emphasizing that it will try to narrow the decline.

In addition, Yang Jie, who was transferred from China Telecom to China Mobile’s parent company earlier this month, was appointed as the chairman and executive director of China Mobile. Asked about the views of the two companies, he said that the two companies have their own characteristics and development trajectory, and laughed that “the mountains are mountainous, the water is watery and soft.”