2nd UPDATE:China Mobile 1st Half Profit Growth Slows On Competition
20 Agosto 2009 - 1:07PM
Dow Jones News
China Mobile Ltd. (CHL), the world's biggest mobile operator by
subscribers, reported Thursday a sharp slowdown in profit growth
for the first half as competition intensified and it added
low-income subscribers in rural areas.
Analysts said earnings growth momentum for China Mobile is
slowing down due to the weakening economy and increasing
competition from China Unicom Ltd. (CHU) and China Telecom Corp.
(CHA). After the commercial launch of its third-generation mobile
service in January, China Mobile has been striving to improve its
network coverage and handset quality to add subscribers.
Chairman and Chief Executive Wang Jianzhou said the slowdown in
its subscriber growth was due to higher mobile penetration in urban
cities, but the company still sees room for growth in central and
western China.
"New value-added services are our new growth drivers. We hope to
maintain sustainable growth in business with continued addition in
subscribers," Wang told reporters at a press conference.
China Mobile reported a net profit of CNY55.3 billion (US$8.09
billion) for the six months ended June 30, up 1.5% from CNY54.5
billion a year earlier. Revenue rose 8.9% to CNY212.91 billion from
CNY195.46 billion.
The growth rate was sharply lower than the 45% it saw in the
first half of 2008 and the net profit figure came in lower than the
average forecast of CNY56.44 billion in a Dow Jones Newswires poll
of 10 analysts.
Partly on concerns about slowing growth, China Mobile's shares
ended down 0.2% at HK$82.85 Thursday, underperforming the benchmark
Hang Seng Index which rose 1.9%.
Wang said he is confident its 3G subscriber base will increase
to around 3 million by the end of the year from 1.09 million at the
end of July.
The executive also said it will launch 3G handsets soon under
the Lenovo, HTC Corp. (2498.TW) and Dell Inc. (DELL) brands using a
mobile operating system which the company has been developing.
"We are hungry for all types of quality handsets," said Wang,
who added that China Mobile remains interested in offering Apple
Inc.'s (AAPL) iPhones in China and talks are continuing with the
U.S. company.
The company added 35.87 million subscribers in the first-half of
this year, bringing its total subscribers to 493.12 million at the
end of June. But the first-half subscriber growth of 19% was
sharply lower than 25% a year earlier.
CLSA analyst Elinor Leung said subscriber growth dropped because
mobile penetration already exceeded 50% and competition intensified
with China Telecom launching its code division multiple access
mobile service.
She said the weak economy has also led to higher churn rates in
coastal areas because migrant workers lost their jobs in the cities
and returned to their hometown.
Chief Financial Officer Xue Taohai said the company expects its
average revenue per user per month to continue to fall in the near
term as it penetrates into rural markets which typically have lower
tariffs.
China Mobile's ARPU slipped to CNY75 in the first half of this
year from CNY84 a year earlier.
ARPU is a key industry gauge to determine the long-term growth
rate of telecom operators.
Wang also said he hopes to conclude a deal to invest in Far
EasTone Telecommunications Co. (4904.TW) "soon."
Wang said the company's internal approval procedure for its plan
to buy a 12% stake in Far EasTone Telecommunications for NT$17.77
billion (US$536 million) has been completed.
China Mobile and Far EasTone are now actively preparing the
application for approval from relevant regulatory authorities.
Wang said he will be traveling to Taiwan to meet with Taiwanese
technology companies on Friday but said he had no plan to meet with
Taiwan's government officials.
China Mobile recommended a first-half dividend of HK$1.346 a
share, up from HK$1.339 a year earlier.
-By Lorraine Luk, Dow Jones Newswires; 852-2802-7002;
lorraine.luk@dowjones.com