Published: Tuesday, 20 Oct 2009 | 6:05 AM ET

Text Size

China Mobile posted a 2.8 percent rise in quarterly profit, but the result fell short of expectations because of rising costs from its costly 3G network rollout and intensifying competition, while the economy is still recovering.

Profit growth for China's top three mobile carriers has been slowing since China Mobile and its two main rivals, China Unicom and China Telecom, embarked on a $58.5 billion plan to build 3G networks, following an industry revamp.

AP

Analysts aid profit for China Mobile, the world's largest mobile carrier by subscribers with slightly more than half a billion users, would remain flattish over the next two years before it realized any benefits from more sophisticated and profitable third-generation services.

The company added an average of 5.68 million new users each month in the first nine months of the year, mostly from poor rural areas as urban markets become saturated.

"However, as new users are mainly low-usage customers, and as new tariffs, and sales and marketing schemes are gradually rolled out, average revenue per user (ARPU) and average revenue per minute of usage showed a decrease, while voice usage volume was stimulated," the company said in a statement.

Like smaller rivals Unicom and China Telecom, which now compete with a full range of services after the restructuring, China Mobile relies increasingly on poorer rural areas for subscriber growth.

China Mobile on Tuesday posted a rise in third-quarter profit of 2.8 percent to 28.64 billion yuan ($4.2 billion), up from 27.9 billion yuan a year earlier, according to Reuters calculations from nine month figures.

The results, however, fell short of the $29.2 billion yuan forecast in a Reuters poll of six analysts.

China Mobile's monthly ARPU -- a key measure of performance -- remained steady at 75 yuan in the January-September period from the same figure in the first half.

Its margin on earnings before interest, tax, depreciation and amortization (EBITDA) in the first three quarters was 51.3 percent, down from 51.6 percent in the first half.

"The EBITDA margin actually rose from the previous quarter, so that is good news. But there is still pressure on margins," said Victor Yip from UOB Kay Hian in Hong Kong. "We still need to see fourth-quarter numbers when the 3G services of all three carriers become fully commercial," said Yip.

The third-quarter share price performance of the country's three telecommunications carriers lagged the 8.16 gain on Hong Kong's China enterprises index during the period.

Only China Unicom shares ended the quarter higher, with a 7 percent gain, boosted by the prospect of selling Apple's

AAPL loading...

Quote  |  Chart  |  News  |  Profile

[AAPL  Loading...      ()   ] iconic iPhone. China Mobile fell 2.6 percent and China Telecom lost 5.2 percent.

Print

Email

Text Size