China Mobile's 3G net adds crash 16%

Losing performance compared to competitors.

According to Maybank Kim Eng, China Mobile lost 4 percentage points of the 3G net add market in November. China Mobile’s 3G net adds for November dropped 16% MoM to 3.1m, while 3G net adds of China Unicom and China Telecom increased 2% and 3% MoM to 3.3m and 3.1m, respectively.

Here's more from Maybank Kim Eng:

The MoM drop in China Mobile’s 3G net adds surprised the market. Since China Mobile raised its subsidies for 2H12F from CNY8b to CNY14b (+75%) in August, the market had anticipated that its 3G net adds would stay strong.

We believe the surprising MoM decline in China Mobile’s 3G net adds in November is due to the popularity of the CNY20 entry 3G plans with usage rebates offered by China Unicom and China Telecom.

Expect China Mobile to follow its peers. Given that China Mobile’s blended mobile ARPU and net profit margin are still relatively higher than that of peers, we expect China Mobile to offer similar low-end 3G plans and rebate promotions.

China Mobile’s 3G penetration was only 12% in November compared to China Unicom’s 31% and China Telecom’s 42%. Therefore, we expect China Mobile will become more aggressive in ramping up its 3G penetration by reducing the pricing of its 3G plans, raising subsidies further and giving more free data usage and rebates.

We currently estimate that China Mobile’s EPS will fall 4% YoY in FY13F on lower ARPU and higher marketing cost assumptions. China Mobile’s share price outperformed peers in 2012 probably due to its dividend yields.