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China Mobile (HK) sees slow profit growth
( 2003-10-21 16:26) (Bloomberg News)

China Mobile (HK) Ltd, the world's biggest mobile-phone company by users, reported its slowest pace of profit growth in more than four years as the carrier cut rates to keep customers and new users spent less.

Net income for the third quarter rose 1.8 percent to 8.73 billion yuan (US$1.1 billion) from 8.58 billion yuan a year ago.

The figures were calculated by subtracting first-half from nine- month earnings. Sales rose 9.4 percent to 40.2 billion yuan from 36.7 billion yuan.

China Mobile's revenue grew at an average of 50 percent a year in the past four years as the company spent US$50 billion acquiring cellular networks from its parent.

The Hong Kong-based company is now growing by signing up users in China's less wealthy provinces and offering discounts to stop nearest rival China Unicom Ltd from grabbing subscribers.

``The honeymoon period -- when China Mobile could easily get profitable customers from its parent -- is over,'' said Winson Fong, a Singapore-based fund manager at SG Asset Management Ltd., which manages US$2 billion and owns China Mobile shares. ``It's a market with 200 million plus users. New subscribers' spending is bound to come down.''

China Mobile's shares are down 71 percent from their peak in 2000, losing more than US$40 billion in value. The stock, Hong Kong's second biggest, has risen 25 percent this year, compared with a 30 percent gain by the Hang Seng Index. The stock rose 0.7 percent to HK$23.15 in Hong Kong. The company posted earnings after the market closed.

User Spending At the end of September, China Mobile had 135 million users in the 21 Chinese provinces it serves, compared with the 123 million users for Vodafone Group Plc as of June 30.

Together with controlling shareholder China Mobile Communications Corp, which serves the rest of China, the two control two-thirds of the world's biggest wireless market by subscribers.

The average monthly bill of China Mobile's customers dropped 13 percent in the first nine months to 103 yuan from a year ago.

That's less than half that of Hong Kong's SmarTone Telecommunications Holdings Ltd., and barely a sixth of NTT DoCoMo Inc.'s. DoCoMo is Japan's largest cell-phone provider and the world's second-largest.

Mobile-phone tariffs are also being pressured by the expansion of the Little Smart intra-city cordless service by two providers of traditional phone services. Little Smart is priced at less than half the cost of cellular-phone services.

A survey of analysts had an 8.9 billion yuan median profit forecast for China Mobile's third quarter.

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