The amplitude of China Mobile's return to A reached 9% on the first day, and whether the "leading big brother" could get out of the new market of operators

With the listing of China Mobile on the Shanghai Stock Exchange, the three major operators officially "met" in A shares.

On January 5, China Mobile opened at 63 yuan, up more than 9% from the issue price of 57.58 yuan, and then the increase fell back, as of the close of the day, China Mobile quoted 57.88 yuan, the increase narrowed to 0.52%, the turnover exceeded 15.2 billion yuan, and the total market value was 1.23 trillion yuan.

In the industry's view, as the "leading big brother" of the three major operators, China Mobile's A-share listing will play a greater leading role, but from the perspective of the valuation of operators and the development space of the industry, China Mobile also has great challenges while facing opportunities.

Fu Liang, a telecommunications expert, believes that for many years, "speeding up and reducing fees" has enabled China to have the world's leading mobile network and wired broadband network, but it also limits telecom operators to obtain excess revenue through basic communication services (including voice, SMS, and Internet access), and telecom operators must find new revenue growth points.

On the first day of listing, "high open low go"

China Mobile's listing is the largest IPO project in the past decade for A-shares, and the performance on the first day is particularly concerned by the outside world.

In the early session of the 5th, in the collective auction stage, China Mobile's stock price rose by 20% to 69.1 yuan, but then fell back, and the opening price was 63 yuan. After the opening, China Mobile's stock price continued to fall, falling to 58.11 yuan at one point, and then after a brief pull-up, the stock price hovered between 58 yuan and 60 yuan. According to the closing price, China Mobile's "amplitude" on the day of listing reached 9%.

Although the stock price is "high and low", it also breaks the inherent view of the outside world that operators "break the issue situation". On August 20, after China Telecom closed up 34.88% on the first day of listing, in the two trading days after listing (August 23 and August 24), China Telecom A shares fell to a halt, and then were in a downward trend.

Some institutions believe that considering that China Mobile's expected PE issuance according to the net amount of funds raised in the declaration draft is about 12 times, which is 40% lower than China Telecom's initial PE, and China Mobile ranks first among the three major operators, it is expected that the risk of subsequent breaks is less than that of China Telecom. In addition, China Mobile's return to A is a milestone event in the communication sector, which has a certain boosting effect on the entire sector, and this time it has increased a new channel for equity financing in the domestic market, and related companies in the upstream of the industrial chain will benefit from operation.

"China Mobile's stock price is low, and the profit margin and dividend yield have maintained a high level, which is conducive to becoming a fixed star in the future A-share stock market." Fu Liang said that China is currently one of the leading countries in global 5G commercial use, more than half of the world's 5G base stations in China, and in China's 5G base stations, China Mobile occupies half.

Can operators "flip" in the post-5G era?

5G converged applications are in a critical period of large-scale development, and technology giants including operators and Internet manufacturers are entering a new competitive track.

"In the 5G era, operators are targeting the emerging market of industry applications, and there are many opportunities, but the competition has become more intense. How telecom operators can use network advantages to achieve differentiated competitive advantages has become the key. Fu Liang said.

From the perspective of fundraising purposes, China Mobile intends to raise 56 billion yuan this time, and intends to invest half of the raised funds into 5G boutique network construction projects, which is enough to see its emphasis on 5G projects.

In the past five years, the substitution role of OTT services in operating voice services and the financial pressure of network investment and construction have made operators a bit "tied", and how to recover the cost of network construction has become a question that the three major operators are often asked in public.

The lack of room for growth has become the main reason for the low valuation of operators. From the data point of view, the average PE multiple of the world's leading telecom operators is 15.53, and the average PE multiple of China's operators in Hong Kong stocks is 7.25, which is far lower than the international average. For comparison, the leading U.S. telecom operator Verizon has a market capitalization of 9.44 times PE, and T-Mobile has a market capitalization of 40.55 times PE.

However, with the further improvement of 5G coverage, operators' revenues ushered in an "inflection point" last year.

In the past few years, the net profit of the three major operators has increased significantly in the financial reports of the third quarter of 2021. According to the performance disclosed by telecom operators, in the first three quarters of 2021, China Mobile's revenue reached 648.6 billion yuan, an increase of 12.9% over the same period last year, and the profit attributable to shareholders of the company was 87.2 billion yuan, an increase of 6.9% year-on-year; China Telecom's revenue was 326.536 billion yuan, an increase of 12.3% year-on-year, and the net profit attributable to the mother was 23.327 billion yuan, up 24.7% year-on-year; China Unicom's revenue was 244.489 billion yuan, up 8.5% year-on-year, up 8.5% year-on-year. Attributable net profit was RMB5.676 billion, up 18.6% year-on-year.

Bi Qi, chief scientist of China Telecom and academician of Bell Labs, said in a meeting that in 2025, the average monthly traffic of users can reach 100GB. "According to incomplete statistics, the monthly traffic of 5G terminals on the 5G network is about 23GB."

This means that operators' revenue on traffic is improved. "Before traffic was a burden, now traffic is revenue." An operator source told reporters.

However, from the perspective of long-term competitive trends, telecom operators do not have an advantage in competition with Internet companies without basic telecommunications networks for Internet content or services.

In the industry's view, if operators want to play a more active role in Internet content or services and the emerging "5G+ industry", they must use network advantages to find the combination of networks and services on the basis of providing low-cost, high-speed basic communication network connections for the whole society, and form differentiated products and services.