The biggest A-share IPO in the past decade has come!

Edit: Small V

On the evening of December 13, the CSRC issued an approval document for China Mobile's IPO and approved the initial public offering application of China Mobile Co., Ltd. in accordance with legal procedures. This means that after the return of China Telecom, the three major domestic operators will gather in A shares.

On August 18, 2021, China Mobile announced that the company's application materials for the initial public offering of A-share shares have been accepted by the China Securities Regulatory Commission.

According to the prospectus, China Mobile intends to be listed on the main board of the Shanghai Stock Exchange, and the number of shares to be publicly issued will not exceed 965 million shares, the proportion of issuance will not exceed 4.50% of the total share capital after the issuance, and the funds intended to be raised will be 56 billion yuan.

China Mobile's fundraising projects include 5G boutique network construction projects, cloud resources new infrastructure construction projects, gigabit zhijia construction and other 5 projects, with a total investment of 156.9 billion yuan, and the total amount of funds to be invested is 56 billion yuan.

It is worth mentioning that China Mobile's 56 billion yuan of fundraising is second only to China Construction Bank, surpassing China Telecom, ranking fifth in A-shares, and is expected to become the largest IPO of A-shares in the past 10 years.

From the performance point of view, in the first three quarters, China Mobile's operating revenue was RMB648.6 billion, up 12.9% from the same period last year, and profit attributable to shareholders was RMB87.2 billion, up 6.9% from the same period last year. Brokerages said that China Mobile's performance in the first three quarters of fiscal 2021 was in line with expectations.

Regarding the pricing of the offering, Essence International Securities believes that the pricing of the offering may be around 1 times the price-to-book ratio. Referring to the price of 4.53 yuan for China Telecom's A-share listing, the price is similar to the price of the company's net assets per share. Considering the impact of various factors, if the price of China Mobile's A-share listing is about 1 times the price-to-book ratio, it is calculated that the company's prospectus price may be around 52.9-55.8 yuan. There is a certain premium rate with the current Hong Kong stock price.

In the context of China Telecom's bankruptcy after its listing and the recent frequent breakout of new stocks, how will China Mobile perform? Will it break?

5G is at the heart

China Mobile intends to raise 56 billion yuan this time. The fundraising investment projects focus on its main business, including 5G boutique network construction projects, cloud resources new infrastructure construction projects, Gigabit Zhijia construction projects, smart middle office construction projects, new generation information technology research and development projects and digital intelligence ecological construction projects. China Mobile intends to invest half of the fundraising into 5G boutique network construction projects.

At the China Mobile Global Partner Conference in November, China Mobile disclosed the latest data on its 5G development. Up to now, China Mobile has opened more than 560,000 5G base stations, the world's largest, the development of 5G package customers 360 million households, terminal customers 250 million households; landed 5G industry application "commercial housing" more than 5,000; led 134 5G international standard projects, obtained 3300 5G patents, ranking first in the global operator camp.

Yang Jie, chairman of China Mobile, said that it is necessary to ensure that by the end of 2022, the continuous coverage of 5G above the township level in the country will be basically realized, as well as the effective coverage of important parks, hot spots and developed rural areas, and provide high-speed, mobile, safe and ubiquitous "connection services".

Giant transformation

In the 5G era, operators, including China Mobile, hope to get rid of the embarrassing situation of being gradually "pipelined" in the 4G era.

Giant ships are hard to turn around. Today's market competition has evolved from a single product and service competition to a higher form of general platform and ecosystem competition, and it is not easy for China Mobile to successfully transform under the fierce market competition.

On the one hand, market participants are more diversified, and the competitive landscape of the industry is becoming more complex and changeable; on the other hand, the integration and innovation of digital services are deepening, the upstream and downstream of the industrial chain are actively occupying the value "highland", and the window period for expanding new areas of information services is accelerating.

In the field of traditional communication services, the market competition between the three major telecom operators in China is relatively fierce, and the overall situation is facing unfavorable factors such as the gradual disappearance of the demographic dividend, the continuous reduction of basic communication service tariffs, and the replacement of some Internet applications, and the traditional business income pressure of telecom operators is relatively large.

In the emerging field of information services, there are many manufacturers such as Internet service providers, software and application developers, equipment and solution providers and digital content providers, and China Mobile will face more diversified competition.

5G brings new opportunities, but the immature business model of 5G business also brings risks.

China Mobile disclosed in the prospectus that the current 5G application is in the early stage of development, the development of related industrial chains, technology research and development, etc. have yet to be further matured, and the future development is still facing uncertainties in many aspects such as technology updates, cost optimization, model landing and market promotion, while 5G needs to be deeply integrated with various industries in standard formulation, equipment research and development, product application and other links, and the integration progress has certain uncertainties.

Will there be a break?

China Telecom was listed on the A-share market before China Mobile, and the amount of financing was similar. On August 20, after China Telecom closed up 34.88% on the first day of listing, two trading days after the listing (August 23 and August 24), China Telecom A shares fell to a halt and have been in a downward trend since then.

Although on September 21, China Telecom A-share Company announced that its controlling shareholder, China Telecom Group, planned to increase its stake in the company within 12 months from September 22, 2021, in an amount of not less than RMB4 billion, it was unable to prevent it from breaking down on September 24.

At the same time, there have been frequent new stock listings recently, including Hualan shares, Rongmei shares, Zhongke Weizhi, Kefu Medical, Zhongzi Technology and many others.

Telecom analyst Fu Liang said that this year is not a good time to list, especially in large-cap stocks such as China Telecom and China Mobile, and are two large-cap stocks with the same theme, China Mobile has opened up the listing interval with China Telecom as much as possible.

Fu Liang mentioned that the break only affects the transaction price, and does not affect the amount of funds integrated into the company. What the stock price will be in the future, it still needs to be proved by the company itself. He believes that China Mobile is not short of money, and its listing purpose is not financing, but to share the company's development benefits with users. At the same time, listing in A-shares is conducive to improving the understanding of its business in China.

When asked about the A-share listing, Yang Jie, chairman of China Mobile, said that returning to A will effectively promote the development of the company, and will also enable customers to have more opportunities to share the benefits brought by the company's growth and development. "Because our customer market is basically domestic, if we come back, the capital market and the customer market will completely coincide." At the same time, he believes that returning to A can better promote the transformation and development of the company.