China Mobile's profits slip

Louise Duffy | 17-08-2012

China Mobile, the world's biggest wireless carrier by subscribers, saw its shares drop by 5% on Thursday following disappointing first-half results.

The company, which is the only Chinese carrier that doesn't have a deal with Apple to sell iPhones, told Reuters it would increase spending on handset subsidies, which it uses to entice more subscribers to smartphones and data, a bigger revenue driver than voice services.

China Mobile has signed up close to seven out of every 10 of China's one billion mobile phone users. But only a tenth of them use higher-revenue 3G technology, a much smaller proportion than that of its main rivals.

Most of the firm's 683 million subscribers use lower-value 2G, a factor weighing on the company's average revenue per user (ARPU), which fell 4.3% in the first half of the year to 67 yuan.

The slide in the ARPU and a 0.9% drop in first-half earnings before interest, tax, depreciation and amortisation to 123 billion yuan, suggested its core business was feeling the impact of rising competition.

Marvin Lo, an analyst at Mizuho Securities in Hong Kong, told Reuters: "This means the telecoms earnings are already declining, which I don't think the market was expecting, so I would say this is quite negative.

"The second-quarter results this year are going to trigger a downward revision for China Mobile's earnings going forward."

First-half net profit rose just 1.5% from a year earlier and April-June net profit of 34.4 billion yuan ($5.5 billion), was slightly below expectations of 35.2 billion. The company only reported figures for the first half, so the quarterly profit was calculated from the company's data.

Read more: China Mobile's profits slip | Rapid TV News