Hong Kong, August 27, 2020 -- Moody's Investors Service has affirmed China Mobile Limited's
(CML) A1 issuer rating. The outlook remains stable.
"The affirmation of CML's rating reflects its leading market position
and pristine balance sheet with a track record of maintaining a substantial
net cash position. CML's credit profile is strong for its
A1 rating, which is constrained by China's sovereign rating,"
says Gloria Tsuen, a Moody's Vice President and Senior Credit Officer.
RATINGS RATIONALE
CML's A1 rating reflects the company's dominant position in
China's mobile telecommunications market, along with its very
strong financial profile and liquidity, supported by its solid operating
cash flow, moderate capital spending, and strong net cash
position.
CML registered an overall market share of 59%, as of the
end of June 2020, based on the total number of mobile customers[1],
despite intense competition. As of the end of June 2020,
it had a network of 4.72 million base stations, and put into
service 188,000 5G base stations in over 50 cities in China.
CML's 5G capital spending will peak in 2020-2022, but
will be manageable given its strong operating cash flow. Moody's
expects adjusted capital spending to average around RMB242 billion each
year between 2020 and 2022, compared with an average of RMB255 billion
in annual adjusted operating cash flow.
The company has remained in a strong net cash position, with RMB402
billion in cash and deposits as of the end of June 2020, and no
reported debt. Dividend payouts have been stable around RMB60 billion
a year, while CML is also cautious in its external investments,
with little impact on its leverage.
CML's adjusted debt/EBITDA registered around 0.2x for the 12 months
to June 2020, driven primarily by tower leases. Moody's
expects the ratio will remain in the 0.2x-0.3x range
over the next 12-18 months.
While CML's operating and financial profiles are very strong for its rating
level, the rating does incorporate a degree of emerging market and
regulatory risk arising from its China-based operations.
As such, the company's rating is constrained by China's sovereign
rating.
The stable outlook reflects Moody's expectation that CML will maintain
its very strong operating and financial profiles over the next 12-18
months.
In terms of environmental, social and governance (ESG) factors,
CML is listed on the Hong Kong Stock Exchange and discloses its business
and financial performance. It is majority owned and under close
supervision by China Mobile Communications Group Co., Ltd.,
which is in turn wholly owned by the State-Owned Assets Supervision
and Administration Commission of China's State Council.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given CML's very strong credit profile, Moody's could upgrade
the rating if China's sovereign rating is upgraded.
Because CML's credit profile is strong for its rating level, a downgrade
is unlikely without a material and precipitous change in its operating
profile and the regulatory environment. However, any negative
action on the sovereign rating will trigger a downgrade of the company's
rating.
The principal methodology used in these ratings was Telecommunications
Service Providers published in January 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1055812.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
China Mobile Limited (CML) is the leading provider of mobile telecommunications
services in China. It is 73% owned by China Mobile Communications
Group Co., Ltd., which, in turn,
is wholly owned by China's State-Owned Assets Supervision and Administration
Commission.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
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issued on a support provider, this announcement provides certain
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support provider and in relation to each particular credit rating action
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provides certain regulatory disclosures in relation to the provisional
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and whose ratings may change as a result of this credit rating action,
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if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
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Moody's considers a rated entity or its agent(s) to be participating
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
REFERENCES/CITATIONS
[1] Public disclosures by CML, China Telecom Corporation Limited,
and China Unicom (Hong Kong) Limited
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Gloria Tsuen, CFA
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Clement Cheuk Yiu Wong
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077