UPDATE: Bank of America Downgrades China Mobile on Potential Earnings Impact of MIIT Policy Adjustment
In a report published Thursday, Bank of America analyst Sydney Zhang downgraded the rating on China Mobile Ltd. (NYSE: CHL) from Neutral to Underperform, but reiterated the $54.84 price target.
In the report, Bank of America noted, “China Caijin news reported that MIIT is considering policy adjustment in 1) granting China Mobile a fixed-line broadband license; and 2) reducing the mobile voice termination rate that China Unicom (CU) and China Telecom (CT) are paying to China Mobile (CM), from the current RMB 6 cents a minute to as little as 3 cents a minute, while CM continues to pay CU/CT RMB6 cents a minute. MIIT will start its hearing on the new policy after the National Day holiday...We downgrade CM to Underperform, as we believe the potential earnings impact will be significant to CM and the overhang could persist for the next few months as MIIT will take some time to deliberate. While the 4G launch could help CM better retain some customers in the near term, we don't think 4G will help its earnings in the next two to three years.”
China Mobile Ltd. closed on Wednesday at $56.50.
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