China Mobile 1H profit up just 1.5%

China Mobile, the world’s largest mobile carrier by subscribers, reported a mere 1.5% rise in net profit for the first half, amid the fierce 3G competition and greater impact from OTT services on the traditional telecoms industry.

Net profit for the six months ended June 30 rose to 63.1 billion yuan ($10.32 billion) from 62.20 billion yuan a year earlier, with growth in mobile data consumption offsetting declines in voice and SMS revenues.
Speaking at a press conference for the company’s interim results in Hong Kong yesterday, China Mobile chairman Xi Guohua said the growing substitution effect brought on by the OTT products, such as Tencent’s popular WeChat service, have caused more intense cross-sector competition, and these challenges pose a threat to the company’s market position and an increasing downward pressure on its development.
In the first half, voice-services revenue dropped 1.2% year-on-year to 175.1 billion yuan, while SMS and MMS revenues down 5.8% to 20.9 billion.
“The substitution of OTT services [on traditional text and voice services] is a progress [of technology advancement] and China Mobile is not immune [to such a trend],” Xi Guohua said, noting that the company expects a growing impact of OTT services on its text and voice services.
Despite that, data business sustained growth momentum, with revenue of 95.4 billion yuan, up 25.5% over the same period last year, and as a percentage of revenue from telecoms services increased to 33.5%. Among them revenue from wireless data traffic reached 47.4 billion yuan, up 62.2%, while wireless data traffic jumped 129% to 891.4 billion megabyte.
Its revenue growth was helped by strong sales of TD-SCDMA smartphones. The company sold 66 million handsets in the first half of this year, Xi said.
China Mobile had 740.15 million subscribers at the end of June, representing 62.8% of the country’s mobile market, down from 65.2 % a year earlier. TD-SCDMA subscriber base grew to 137.9 million at the end of June, after the company added 70.08 million 3G users in the first half.
China Mobile, facing intensified competition from China Unicom and China Telecom, is pinning hopes on 4G to strengthen its position after losing market share in the past few years.
The operator is actively preparing for commercialization of 4G, with more than 100 devices are in development for the carrier’s TD-LTE network, and 15 handsets ready for service, China Mobile chief executive Li Yue said.
Li said the company is on track to expand its TD-LTE trial networks to 100 cities this year, with 200,000 base stations that can reach a population of 500 million people.
The company in June started taking bids on the first of its contracts to supply the 207,000 base stations needed for its new 4G network, after building a trial 4G network in 15 cities in 2012.
China Mobile has spent only 57 billion yuan ($9.3 billion) of the 190.2 billion yuan it has earmarked for capex this year. Much of the $7 billion the company will invest to build its 4G network will come from that planned capital expenditure in the second half, Li said.
China Unicom on Aug 8 posted a 55% jump in profit to $869 million on the back of strong 3G sub growth. China Telecom, the smallest mobile carrier in the country, will report its results on August 21.