by winston » Wed Aug 13, 2008 7:43 am
Not vested.
String of bad calls piles pressure on China Mobile
Benjamin Scent
China Mobile (0941) shares continued to fall yesterday after Citi and Nomura cut their target prices for the stock, joining UBS in saying the possibility of slower growth in the sector could dent earnings of the country's largest wireless operator.
Citi also lowered its profit forecasts for the red chip, saying it has a bright future but faces a rocky road in the short term.
In a note out yesterday, Merrill Lynch said China Mobile shares are a "trading sell."
Technical analysis points to additional downside for the stock after it broke through the HK$100 support level, the investment bank said.
"Could we see [China Mobile] at HK$80?" Merrill asked.
It said a damning report in the Financial Times on China Mobile's 3G offering added fuel to its concerns about the company.
The rollout of the next-generation network, based on China's homegrown TD-SCDMA technology, is being led by China Mobile's parent company.
But there is an increasing likelihood that the listed company will have to bear some of the capital expenditure, Merrill said. The mobile giant could also have trouble selling its new 3G services such as video calling, mobile data, and mobile television.
After testing the new service, local staff at the FT Beijing bureau were quoted as saying "it sucks," "it's too terrible," and it's "too awful."
Trial users described TD-SCDMA phones - made by mainland-based vendors - as "too ugly" and complained that they went off for no reason.
Although 3G commercial trials were launched just before the Olympics in an attempt to showcase streaming broadcasts, the FT said video quality on older 2G phones is better.
If China Mobile's parent company asks the listed company to provide support for TD-SCDMA, there would be a "significant downside" to EBITDA margins and earnings over the next two years, due to the inevitable handset subsidies, Merrill warned.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"