China Mobile’s RMB 100 bln into 5G spurs sector’s stocks, some up 10%
Mar 20, 2020 (China Knowledge) - China Mobile released its 2019 annual results yesterday, showing a 1.2% growth in revenue but a 9.5% drop in net profit. Despite lowered profits, it still continues to go ahead spending a hefty RMB 179.8 bln on capital expenditure in 2020, up 8.4% on a year-on-year basis. One large chunk is 5G related investment budgeted at RMB 100 bln, or over 4 folds of last year's RMB 24 bln. This clearly indicates China Mobile's firm determination on the construction of 5G infrastructure.
Yesterday, A-shares companies in the 5G related businesses performed strongly, with Wuhan Fingu Electronic (002194), TFC Optical Communication (300394), Fiberhome Telecommunication (600498) surging to their daily trading’s up-limit of 10%. In addition, ZTE (000063), Shijia Science & Technology (002796) rose nearly 7%.
The telco giant produced a staggering revenue of RMB 745.9 bln in 2019, up 1.2% year on year. In the annual report, a final dividend of HKD 1.723 per share is recommended, together with the interim dividend paid, HKD 3.25 per share for the full year 2019.
In the press release yesterday China Mobile is said to significantly increase 5G spending in 2020, and it is expected to build more than 300,000 5G base stations covering basically all the cities in China. While in 2019, it has set up 50,000 base stations, providing 5G commercial services in only 50 cities.
Industry insiders estimate that for the March to May period China will enter 5G procurement peak from telco operators. In the long run, the growth rate of operators' capital expenditure is also expected to increase further until 2023.
Global System for Mobile Communications Alliance (GSMA) has reported that 90% of USD 180 bln in mobile-based capital expenditure by Chinese operators during 2020-2025 will be spent on 5G networks. With such large-scale procurements, the equipment suppliers and upstream components manufacturers are expected to gain.
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