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China Mobile shares slump after huge profit dip in Q4

By Bloomberg | China Daily | Updated: 2015-03-20 07:15

China Mobile Ltd fell the most in six months on Thursday after posting its largest profit drop since 1999 amid rising spending on a new high-speed network.

Shares in Hong Kong slumped as much as 3.5 percent, the most since September. Net income dropped 12 percent to 26.7 billion yuan ($4.3 billion) in the fourth quarter, according to figures derived from annual results the Beijing-based company released on Thursday.

The world's biggest carrier by subscribers, which started offering Apple Inc's iPhone 6 in October, spent more to promote its fourth-generation network and stoke demand for data sales. Costs to market and support the faster service, which makes watching videos or streaming music easier for smartphone users, helped drag yearly profit down by 10 percent.

"The results are slightly below the expectations for both sales and net," said Ricky Lai, a Hong Kong-based analyst with Guotai Junan International Holdings Ltd. "The company had to launch incentive programs to migrate 2G subscribers to its 4G network."

The push to get older subscribers to upgrade also lowered the average revenue per user, as traditional 2G customers consume less data after they shift, Lai said.

Sales in the quarter fell 4.2 percent to 160.2 billion yuan. That compared with the 165.8 billion-yuan average of four analyst estimates compiled by Bloomberg.

China Mobile had 800 million subscribers at the end of December, which included more than 90 million on the new 4G network, the company said.

"We are facing severe challenges from intensified competition," Chairman Xi Guohua said in the statement. "Competition among traditional operators focusing on existing customers and business and data traffic will be further intensified, with a more diverse range of competitors in a more complex competitive landscape."

Adjustments of government policies will also have considerable impact on the company, Xi said.

The State-owned Assets Supervision and Administration Commission told China's three carriers to cut the amount they spend on subsidies and advertising for devices, such as the iPhone, people familiar with the matter said in July.

When China Mobile released the iPhone 6 and 6 Plus in October, it offered no direct subsidies for the hardware. Instead, customers were given discounts on calling plans depending on their monthly spending.

On the most expensive plan, the total discount of as much as 3,264 yuan over two years was equal to about 62 percent of the cheapest iPhone 6.

Results in the period were also affected by the June 1 imposition of a new value-added tax on telecommunications services.

 

 

 

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