Rating Action: Moody's affirms China Mobile's A1 rating; outlook stable
Global Credit Research - 27 Aug 2020
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.
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, 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.
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 debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
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The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Moody's considers a rated entity or its agent(s) to be participating when it maintains an overall relationship with Moody's. Unless noted in the Regulatory Disclosures as a Non-Participating Entity, the rated entity is participating and the rated entity or its agent(s) generally provides Moody's with information for the purposes of its ratings process. Please refer to www.moodys.com for the Regulatory Disclosures for each credit rating action under the ratings tab on the issuer/entity page and for details of Moody's Policy for Designating Non-Participating Rated Entities.
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.
 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
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