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August 21, 2009

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Biggest telco calls in lower Q2 profit

CHINA Mobile yesterday reported its first drop in net profit since 1999 because of rising competition from rivals China Telecom and China Unicom and its weak 3G performance.

The world's biggest telco posted a net profit of 30.1 billion yuan (US$4.42 billion) in the second quarter, compared with 30.6 billion yuan a year ago.

Analysts had previously forecast a net profit of 31.4 billion yuan for the period.

"A macro-economic slowdown, a rising mobile communications penetration rate and changes in the competitive environment of the telecommunications industry in China have posed challenges to the development of the business in the first half," China Mobile said in a statement.

In the first six months, China Mobile posted a net profit of 55.3 billion yuan, a 1.4 percent annual growth. Its revenue totaled 212.9 billion yuan, an 8.9 percent rise from a year ago.

China Mobile's monthly average revenue per user, a key index of the industry to monitor a telco's profitability, was 75 yuan in the first half, about 10 percent less than a year ago.

China Mobile added 35.87 million users in the first half to total 493 million by the end of June. The telco had 957,000 3G users since it started a trial 3G service in April.

In the first half, China Mobile took 66 percent of the total new additional mobile users, compared with 85 percent a year ago, due to the "changed competitive landscape," the company said.

"The gap between China Mobile and other rivals will become narrow but it will still dominate the market for about two years," said Wu Wenzhao, a telecommunications analyst of Analysys International.

In January, China issued 3G licenses to China Mobile, China Unicom and China Telecom.



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