Profits squeezed at China Mobile

Profits squeezed at China Mobile

14 MAR 2013

Greater competition and a maturing mobile market are slowing down profitable growth at China Mobile, the world’s biggest wireless operator in terms of subscribers.

Chairman Xi Guohua, in a statement, referred to a “more complex competitive landscape” and a “challenging backdrop”. Elaborating, he said that “the emergence of new technologies and businesses, particularly in internet, magnified the impact and substitution effect on the traditional communications sector”.

Full-year net income for 2012, at CNY129.4 billion ($20.8 billion), was up 2.7 per cent from the previous year. That’s the slowest growth in three years, Reuters said. Profit from operations fell over the same period, down from CNY151.3 billion to CNY150.5 billion.

Underlying cash profits, or EBITDA, rose a slender 1 per cent, to CNY253.6 billion. Even so, an EBITDA margin of 45.3 per cent still makes China Mobile a relatively streamlined operation, although operational pressures are increasing

Profits look likely to be squeezed even further this year. According to a Bloomberg report, based on a briefing given by Xi Guohua in Hong Kong, China Mobile’s capital spending will jump by 49 per cent in 2013, to CNY190.2 billion. Reuters reports that CNY41.7 billion will be spent on developing a 4G network.

China is not expected to award 4G licences, however, until the end of 2013. That means 4G network investment will not immediately generate a return. “If there is no revenue, there will be no profit associated with this investment,” Neil Juggins, a Hong Kong-based analyst at JI Asia Research Ltd, told Bloomberg. “The concern is that the company will see a drop in profit in 2013.”

China Mobile is in the process of building out a TD-LTE network, which it has been trialling in 15 cities. This year, China Mobile intends to expand the network’s reach to 100 cities using 200,000 base stations.

China Mobile’s customer subscriber base totalled 710 million by the end of 2012, including 88 million 3G customers. However, a net addition of 61 million customers (of which 37 million were 3G) was not enough to prevent China Mobile’s overall market share slipping, down from 66.5 per cent in 2011 to 63.9 per cent last year.

Encouragingly, China Mobile is experiencing a surge in wireless data traffic revenue, which jumped 54 per cent, to CNY68 billion. Sales from application and information services also increased to CNY53.4 billion (CNY48.4 billion), but SMS and MMS revenue – squeezed by internet-based businesses – dropped to CNY44.2 billion (CNY46.5 billion).

Date service revenue overall grew 19.4 per cent, to CNY166.3 billion, and now accounts for nearly 30 per cent of overall sales (up from 26 per cent the year previously). However, flat growth in voice revenue (up 1 per cent) means that overall sales grew by a more modest 6.1 per cent, to CNY560.4 billion.

Author

Ken Wieland

Ken has been part of the MWC Mobile World Daily editorial team for the last three years, and is now contributing regularly to Mobile World Live. He has been a telecoms journalist for over 15 years, which includes eight...More

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