How they do it at China Mobile

It is just over eight years since China Mobile – then known as China Telecom – listed its shares and ADRs on the Hong Kong Stock Exchange and NYSE, respectively. At the time of its IPO in the fall of 1997, the Chinese economy was beginning to murmur but international investors had not realized its full potential. At the time, Asia was still reeling from a currency crisis and few would have predicted the way the region in general and China in particular would recover over the coming decade. 

Today, China Mobile offers a potent mix for investors, a direct play into the world’s fastest-growing economy and vibrant telecom sector. The company already boasts the world’s largest mobile subscriber base at around 205 mn people – but that still represents only a relatively small chunk of the country’s 1.3 bn overall population. There is, as one analyst puts it, room for expansion. 

Learning curve
The last eight years presented a steep learning curve for China Mobile as it came to grips with growing levels of interest from overseas investors. Grace Wong, company secretary and deputy general manager of IR, explains that the early days as a public company were characterized by more of a reactive approach. The company had to feel its way around, learning what investors expected and wanted and then, slowly, expand the information offer accordingly. 

‘In the beginning we really focused on the sell side,’ says Wong, adding that the analyst community provided a simple yet efficient means of building an investor following both in Asia and the US. That was important as, at the time, there were just two people looking after IR and they did not have access to all of the tools the IR team takes for granted now. ‘Today, our approach is far more balanced,’ continues Wong. ‘The sell side, particularly in Hong Kong, still knows us very well and we take care to ensure it is kept up to date. But we also focus on fund managers and have built up our own contacts over time.’ 

Wong now heads up a seven-strong team and stresses the fact that she and her colleagues come from a range of professional disciplines. Wong, for example, is a qualified company secretary and recently added that responsibility to her IR role for the company. The team also boasts a qualified analyst and some accountants. ‘We deal with a lot of compliance issues so those backgrounds help,’ explains Wong, noting the need for knowledge of US, Asian and European disclosure regimes. 

She adds that having people with a financial and regulatory background on the team helps China Mobile to understand and comment on sell-side models and the like, as well as to appreciate the regulatory issues its audiences face. 

Wong says the senior management team at China Mobile has always tried to take IR seriously. In recent years, however, the IR function has been elevated up the corporate ladder – certainly in practice if not in the strict hierarchical sense. And the November 2004 appointment of Wang Jianzhou as executive director, chairman and CEO following the resignation of Wang Xiaochu strengthened that trend. The result is that most senior management members are keen to talk to investors and go out of their way to attend investor events and roadshows. Analysts have certainly noted the more proactive approach to IR (see What the analyst says, below). 

Cross-country
Despite senior management’s commitment to good information flow, Wong and her colleagues face a very serious logistical problem. They are based in Hong Kong, the main financial center in the region and home to the company’s main stock exchange listing. The senior management team, on the other hand, is based in Beijing, Shanghai and some other centers on the mainland. That means a lot of travel for Wong and her team, although the chairman and other members of the management team also regularly come to Hong Kong to meet with the financial community on its own territory. 

Wong makes it clear she measures the company’s information flow relative to an international peer group, rather than against other Chinese companies. The web, e-mail and conference calls have really come into their own in recent years in terms of keeping them in touch with overseas investors. Most of the calendar presentations are available online in video and slide format – and they are easy to access, too. 

The team also uses e-mail alerts to ensure its audiences are up to date with the release of new figures. Those include monthly updates on subscriber data and quarterly releases detailing changes in the company’s main key performance indicators, including key operating and financial data, such as Ebitda. ‘Analysts and investors know when to check on our web site for our monthly numbers but, if we have to change the date for any reason, we’ll make sure they are all well aware in advance so there is no confusion,’ says Wong. 

Over the last year or so, the IR team has been concentrating on increasing the number of events it attends or organizes. Financial results are usually followed by a standard round of analyst briefings and conference calls out of Hong Kong, backed up by a tour of investors in the region and beyond. The aim has been to take senior management to the US at least once a year, taking in the east and west coasts in the trip. Japan is also an increasingly frequent stop off – Wong notes that several Japanese telecoms companies have similar business models so, despite cultural and language differences, Tokyo-based investors find it easy to understand her company. 

Aside from these calendar events, Wong and her colleagues meet regularly with analysts and investors in one-on-one situations and make a real effort to attend investor conferences as much as possible. Indeed, several analysts note the value of this approach. What stands out, though, are the analyst education days. Wong thinks of these as reverse roadshows whereby analysts are invited to see the operations and speak with senior subsidiary management. 

In May 2005, for example, analysts were invited to visit Shanghai Mobile and Hunan Mobile to gain a better understanding of what makes these subsidiary businesses tick. Meeting with local management is all important as the holding company is composed of some 31 local subsidiaries in which it owns a 100 percent interest – each subsidiary being representative of one of China’s provinces, autonomous regions or other municipalities. 

Analysts and investors were also invited to a presentation in Hong Kong focusing on the company’s wireless data business. ‘We brought in a range of our partners and content providers to give the financial community a wider view of the data business – a key part of our new business this year,’ says Wong. 

Feedback time
Of course, it’s not just about delivering information to the financial community. Much of Wong’s role concerns understanding what investors and analysts are thinking and then feeding that back to senior management so they can take it into account when planning their long and short-term strategy and other business decisions. 

Wong provides a summary of analyst notes to senior management on a monthly basis, together with an overview of their thoughts on the competition. Management also receives a quarterly update on key shareholder movements in each market, together with Wong’s recommendations on how to respond to trading patterns. Should the company attend some extra investor conferences in the US, for example? Or does it need to schedule an additional trip to Singapore to see a major investor?
 
It’s only through experience that Wong and her team have become more adept at picking up on the various signals emanating from investors across the globe and reacting to them accordingly. There has, however, been a real attempt to seize the initiative and that means an increasing number of one-on-ones for Wong and the senior management team outside of the usual roadshow calendar. Luckily, she has the support of Wang Jianzhou, both in terms of time and resources. The investor community seems to appreciate that input, too.