China Mobile

China Mobile income forecast to rise 30pc

PUBLISHED : Tuesday, 18 March, 2008, 12:00am
UPDATED : Tuesday, 18 March, 2008, 12:00am


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China Mobile is expected to report up to a 30 per cent surge in net profit for last year, thanks to strong growth in subscribers and rising revenue from non-voice value-added services.

Analysts estimate China Mobile's net profit to be in the range of 82.6 billion yuan (HK$90.61 billion) to 86.6 billion yuan, up 25.1 to 30 per cent from a year ago.

Revenue is expected to grow 21.6 to 22 per cent to between 359 billion yuan and 360 billion yuan.

The company will announce its final results tomorrow.

Marvin Lo, an analyst at Daiwa Institute of Research, said China Mobile should give investors details on how the company made use of the huge operating cash flow.

'The company, which has over tens of billions in cash, should explain on the use of the cash as the company's parent has taken up investment in the TD-SCDMA 3G network,' Mr Lo said yesterday.

China Mobile paid 47 per cent of its net profit in 2006 as dividends. Mr Lo said he hoped the company could keep its progressive increase in dividend payouts in the next few years.

Credit Suisse expects China Mobile to pay 2.09 yuan per share in dividends, including a final dividend and special dividend.

China Mobile added 68.1 million subscribers last year, mainly driven by users in rural areas. As such, analysts will focus on the impact of the average revenue per user (arpu) from the increasing proportion of low-spending rural users.

'There should be dilution as more subscribers are coming from low-spending rural segments,' Mr Lo said.

The government-instructed tariff cuts, such as the calling party pays mechanism, also helps China Mobile's voice traffic volume.

'Although the implementation of calling party pays could cause revenue per minute to fall, we expect this to be compensated by the surge in minutes of usage. This coupled with relatively benign competition should help the arpu of 90 yuan to remain stable in the fourth quarter last year,' Credit Suisse's analyst Jeffery Tan wrote in a research report yesterday.

Goldman Sachs said historical results would be less important than in past years as the market focus was now on the upcoming restructuring issue.

'[The past year's figures] are less of an indicator of future performance than before,' Goldman analyst Helen Zhu said.