Investment banks remain positive about China Mobile, the world's top cellular carrier, after its first-quarter results announcement, despite the company's larger-than-expected drop in its average revenue per user (ARPU).

China Mobile posted January-to-March profits of 24.1 billion yuan, up 37.2 percent, and revenue growth of 20 percent to reach 93 billion yuan. However, the two figures dropped 11.3 and 5.6 percent, respectively, quarter-on-quarter.

Investment banks including JPMorgan, CLSA, UBS, Lehman Brothers reiterate "overweight" or "buy" to China Mobile after the results were announced yesterday, as they are broadly in line with estimations, with some banks raising their target prices and estimated earnings growth for 2008.

JPMorgan analysts Jimmy Cheong, Yvonne Chow and Miao Ling Sun said the results were very good.

"While there are a couple of data points to be watched closely going forward, such as ARPU and negative price elasticity ... headline growth should still be strong this year," they said.

CLSA revised China Mobile's full-year-earnings estimation by 2.1 percent to 118 billion yuan, a year-on-year growth of 35.6 percent as revenue growth will remain healthy and margins remain stable. It also rose the target price up 3 percent to HK$155 per share given an upside of more subscribers and yuan appreciation.

China Mobile's average monthly net additional subscribers for the first quarter reached 7.6 million, up by more than a third from the average net additional subscribers of 5.68 million last year.

Credit Suisse raised the shares' target price to HK$146, up 9 percent.

ARPU, a key performance indicator, remains the top concern of analysts for the year-end results of the mobile carrier, as ARPU fell to 82 yuan per month at the end of March, down from 91 yuan at the end of December.

The fall in ARPU is generally bigger than the estimated mid-80s yuan due to the historic seasonality, but whether an expansion into rural areas would drive ARPU further down is controversial. Yet given the company's guidance, analysts expect shares to rebound in the second and third quarters.

Given the analysts' ARPU predictions, estimated earnings for 2008 and 2010 are cut by 2.9 and 3.2 percent, respectively, while estimated earnings for 2009 increase 0.7 percent. Both China Mobile's revenue and profits fell below the bank's estimations.

The company's shares closed yesterday at HK$131.90 each, down 2.08 percent.

(HK Edition 04/23/2008 page3)