Stacie Stuart (CHL)November 10, 2011

China Mobile Limited

• “Largest telecommunications operator in the world by customer base and network size”

• More than 630 million customers• Incorporated on September 3, 1997• Owns over 100% in various operating

subsidiaries– 31 for the provinces in China

Criteria Requirements: Company Industry Does it match our Criteria?Solvency and Financial Leverage Ratios:Current Ratio > 1 1.3 1.63 YDebt Ratio < Industry Average 0.1 3 YEfficiency Ratios:Total Asset Turnover > Industry Average 0.58 0.59 NInventory Turnover > Industry Average 7.23 36.44 NProfitability Ratios: YNet Profit Margin > Industry Average 24.45 10.02 YReturn on Asset (ROA) > Industry Average 14.1 6.04 YReturn on Equity (ROE) > Industry Average 21.5 12.5 YGrowth Ratio (5 years):Historical EPS Growth > Industry Average 17.07 4.76 YHistorical Revenue Growth > Industry Average 15.2 8.73 YProjected EPS Growth >10%* and > industry AverageOther Informative Data:P/E 10.3 16.2 GOODP/B 2.1 1.7 BADPEG 1.4 --Fair Value Estimate 56.00$ Current Price (10/17/2011)Purchase Price 50.90$ Dividend 0.91$ Dividend Yield >2%** 3.7% YShares Owned 30

Criteria

Chart

Strengths

• Revenues increased due to additional subscribers while ARPU decreased

• 68% of entire market– 45% in 3G high margin (43% of entire market)

• Growth– Investment in marketing and infrastructure in competitve areas

• Strong Balance Sheet• Scale efficiency

Weakness

• Although there is growth, grow in rural, low income areas

• Competitors have better 3G technologies and a larger smartphone selection

• Decreased EBITDA– Excusable because of growth and investments

Opportunities

• Installing Wi-Fi hotspots• More handset vendors (eg. HTC)• Rise value added and data services• Upgrade 2G customers to 3G (Higher margin)• Although rural areas are bring in less income,

there is less competition

Threats

• Government regulation– Mandate to use less mature TD technology in 3G• Must use China’s own 3G standard: TD-SCDMA

– May allow competitors to cut prices• Intense competition• Number portability– Changing customers from 2G to 3G

Recommendations

• HOLD

• Morningstar’s Recommendations– Hold: 2– Buy: 2

• Closing Price (11/9) - $47.89• Purchase Price (10/2009) - $50.90