Moody's: China Mobile's 2012 Results in Line with Expectations
Moody's Investors Service says that China Mobile's 2012 results were broadly in line with expectations and have no immediate impact on the company's Aa3 rating.
The rating outlook remains positive, in line with the outlook for China.
China Mobile's revenue grew by 6.1% in 2012, supported by continued growth in the number of subscribers in the voice services segment, and revenues for wireless data traffic in the data services segment. These segments accounted for 65.7% and 29.7% of total revenues in 2012.
At the same time, the reported EBITDA margin declined to 45.3% in 2012 from 47.5% a year ago, largely because of declines in average revenues per user (ARPU) and higher operating expenses.
"While China Mobile's margins are expected to gradually decline because of the deepening penetration levels in rural areas with lower ARPU as well as increasing proportion of lower-margin data revenue, the margins will continue to remain strong relative to global peers for at least the medium term," says Laura Acres, a Moody's Senior Vice President.
"Given China Mobile's dominant market position in China and solid earnings, together with the low level of debt, its financial and liquidity profiles will remain solid in 2013," adds Acres.
China Mobile's adjusted debt/EBITDA was about 0.3x and funds from operations interest coverage was in excess of 50.0x, based on its 2012 results. These financial metrics remain strong for its Aa3 rating and positive outlook.
In addition, China Mobile maintained a net cash position of about RMB378 billion as of December 2012, with unrestricted cash balances of about RMB408 billion versus total debt of about RMB30 billion.
Such strong liquidity can cover the company's high capex requirement for coordinating the four networks, namely 2G, TD-SCDMA, TD-LTE and WLAN.
The company's capex for 2012 was RMB127 billion, or about 23% of its revenue. The company plans to increase its capex to RMB190 billion, or over 30% of its revenue, to deal with growing demand for data services and improve its competitive edge, by strengthening its TD-LTE network.
Moody's expects certain cash flow ratios may fall in 2013 due to the high level of capex. However, its overall credit profile will remain consistent with its rating level.
Moody's believes that the company will maintain its relatively modest dividend payout ratio of 43% for 2013 which should help bolster it to maintain free cash flow metrics despite the increase in capex.