China Mobile, the world's top cellular carrier, posted a 37 percent rise in its quarterly net profit on Monday thanks to strong subscriber growth.
As market saturation slows the growth of new mobile subscribers in big cities, China Mobile and smaller rival Unicom are pushing to sign up customers in less-affluent smaller cities and rural areas of the world's largest telecoms market.
Both companies face the threat of a long-awaited restructuring of China's telecoms sector, which analysts expect to result in fixed-line players China Netcom and China Telecom being granted entry into the high-growth mobile business, creating new rivals.
China Mobile, which dominates the world's biggest telecoms market, posted a profit of 24.1 billion yuan ($3.44 billion) for the three months ended March 31, compared to 17.56 billion yuan a year earlier.
The result fell a touch short of an average of forecasts for net profit of 24.65 billion yuan, according to four analysts polled by Reuters Estimates.
Average monthly net additional subscribers for the first quarter reached 7.60 million, representing an increase of 33.9 percent compared to the average monthly net additional subscribers of 5.68 million of last year.
The group's subscriber base reached 392.14 million as of March 31, 2008.
"However, as the new subscribers are mainly low-end users and tariff adjustments are steadily and gradually introduced in the first quarter, (average revenue per user) ARPU and average revenue per minute of usage recorded a decrease," China Mobile's Chief Executive, Wang Jianzhou, said in the statement.
The longer-term prospects for China's mobile operators depend on when China's home-grown third-generation (3G) technology takes off, as the arrival of 3G -- which will offer faster Internet access and improved video streaming -- may open up new sources of revenue for operators.
China Mobile's stock, closed up 2.43 percent at HK$134.70 on Monday before the results were announced.
The shares fell 16 percent in three months to March 31, in line with Hong Kong's Hang Seng Index, which shed 18 percent.
China Mobile's operating revenue grew to 93.02 billion yuan in the quarter, up 19.7 percent from 77.71 billion yuan a year earlier.