HongKong Business

China Mobile quarterly profit advances 5.4%

(HK Edition)
Updated: 2011-04-21 06:53
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China Mobile Ltd, the world's biggest phone carrier by users, reported a 5.4 percent increase in first-quarter profit as sales were lifted by mobile Web users downloading music and games on smartphones.

Net income climbed to 26.9 billion yuan, from 25.5 billion yuan a year earlier, with operating profit rising 8.3 percent to 118.2 billion yuan, the carrier said in a statement to the Hong Kong Stock Exchange Wednesday. Sales rose 8.3 percent to 118.2 billion yuan during the period.

Chairman Wang Jianzhou expects the data business will be a significant source of future revenue growth and plans to boost capital spending 6.5 percent this year to bolster services.

China Mobile will spend as much as 132.4 billion yuan to invest in the network and add wireless hotspots as it aims to keep attracting smartphone users and help maintain its lead over China Unicom (Hong Kong) Ltd and China Telecom Corp.

"It is data revenues that are increasing sharply," Colin McCallum, an analyst with Credit Suisse Group AG in Hong Kong, wrote in an April 15 report. "This looks to be a very healthy ratio of revenue to volume, which China Mobile's management has put down to a conscious strategy of avoiding unlimited data packages."

Profit in the first quarter was projected at 26.8 billion yuan, on sales of 119 billion yuan, according to the median of four analysts' estimates in a Bloomberg News survey.

First quarter saw continued pressure on the carrier's average revenue per user (ARPU), which fell to 67 yuan per month from 76 yuan in the fourth quarter last year, as lower-spending rural customers increased along with the growth in overall subscribers. Subscribers increased by 16.8 million over the period to 600.8 million, China Mobile said.

The company has sought to attract higher-end 3G users and offer subsidized handsets from brands such as Apple Inc and HTC Corp in return for multi-year contracts.

"There are always lower contributing users which dilute the ARPU," said Victor Yip, an analyst at UOB Kay Hian in Hong Kong.

"We know over 50 percent of the new mobile subscribers for China Mobile are from the rural areas, which is contributing less to the ARPU," Yip said.

Yip expected 2011 ARPU for China Mobile, which competes with China Unicom and China Telecom Corp Ltd, to be slightly above 70 yuan, versus 73 yuan in 2010.

"The group faced challenges such as the increasing mobile penetration rate and intensifying market competition," China Mobile said in the statement.

China Mobile rose 0.8 percent to HK$72.60 at the close of trading in Hong Kong on Wednesday before the earnings announcement. The stock has fallen 6 percent this year.

China Unicom and China Telecom will report quarter earnings next week.

Bloomberg - Reuters

(HK Edition 04/21/2011 page2)

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