China Mobile Is Sitting On More Cash Than Apple
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
China Mobile, the world’s largest mobile phone operator, is sitting on more cash than Apple. However, with that excess amount of cash, China Mobile seems to be missing out on cashing in on the phone industry’s cheapest stock valuations in two years.
China Mobile, the world’s largest mobile phone operator, is sitting on more cash than Apple. However, with that excess amount of cash, China Mobile seems to be missing out on cashing in on the phone industry’s cheapest stock valuations in two years.
Cheaper valuations in the mobile phone industry have made it one of the most active years for mergers and acquisition, with Bloomberg reporting a total of 476 deals worth US$146.5 billion this year.
Yet, China Mobile’s chairman, Wang Jianzhou, believes that the excess cash could be better spent on network upgrades at home. With a slower subscription growth this year, China Mobile has yet to make any major purchases, domestically or abroad.
[quote] “We do have a strategy but we do not have acquisition targets. We will try to find some new opportunities for investment, including overseas investment,” said Wang in an interview with Bloomberg. [/quote]
As of June 30, China Mobile had US$51.1 billion in cash and cash equivalents, compared to Apple’s $28.4 billion in cash.
Related: Paradox of Thrift: Hoarding Cash in Corporate America
Investors are also saying that China Mobile should return the money as dividends. Currently, China Mobile’s dividend payout is 4.2 percent, about half of what the Vodafone Group pays its investors.
Others, have different suggestions for the Chinese telco.
“What they need to do is take a long look at buying European telcos.” said David Fergusson, a fund manager with Woodside Holdings Investment Management. Spain’s biggest phone company, Telefonica, have seen their share price fall by 18 percent this year, a good deal relative to their estimated earnings.
“The worst thing they can do is sit on cash and watch it go up and up, or buy assets in China like recapitalising banks,” said Fergusson.
