China Mobile eyes aggressive expansion

PUBLISHED : Thursday, 17 March, 2011, 12:00am
UPDATED : Thursday, 17 March, 2011, 12:00am

China Mobile, spurred by steady gains last year, has raised its capital spending this year to mount an aggressive expansion of infrastructure and services, including extensive trials of its advanced fourth-generation wireless system.

The world's largest mobile network operator, with 584 million total subscribers as of December, plans to spend 132.4 billion yuan (HK$157 billion) this year, up from 124.3 billion yuan last year, after earlier providing guidance of a 20 per cent year-on-year decline in capital expenditure.

It aims to spend another 255.9 billion yuan over the next two years.

Chairman Wang Jianzhou said the carrier 'will expand into new areas and lead the development of mobile internet' to stay ahead of domestic rivals China Unicom and China Telecom Corp, and eventually become a global industry leader.

Part of that strategy has China Mobile promoting the wide adoption of the mainland-backed 4G standard, known as Time-Division Long-Term Evolution (TD-LTE), by telecommunications equipment manufacturers and network operators in other countries.

'China Mobile has previously said it is seeking to expand globally in the next 10 years, with an initial focus on emerging markets, but any projects that would help the development of TD-LTE would be considered,' said Lisa Soh, an analyst at Macquarie Equities Research.

The carrier yesterday reported that its net profit last year rose 3.9 per cent to 119.6 billion yuan, from 115.2 billion yuan in 2009, on the back of increased subscriber numbers, higher voice traffic and what Wang described as 'record growth' in value-added services, which includes mobile internet access, music downloads and mobile payments.

That net profit included China Mobile's share in the profit of Shanghai Pudong Development Bank, amounting to 558 million yuan. It acquired the bank last December as part of plans to develop its mobile banking and e-commerce services.

China Mobile's total revenue climbed 7.3 per cent to 485.2 billion yuan from 452.1 billion yuan the previous year. Average monthly revenue per user was 73 yuan, which marked a slowdown in decline.

'The results were more or less in line with forecasts,' Soh said.

The carrier expected to have more than 25 million 3G users by the end of the year, after leading the domestic market with its 20.7 million 3G subscribers as of December.

To hit that new goal, China Mobile would raise handset subsidies to 17.5 billion yuan this year, up from 15.2 billion yuan last year, chief financial officer Xue Taohai said.

Wang said he hoped commercial trials for its 4G services would start later this year, following pilot tests of TD-LTE networks in seven cities.

Nicole McCormick, senior analyst at market research firm Ovum, said: 'It makes sense for China Mobile to roll out commercial 4G services as soon as possible because TD-LTE is a true international standard, unlike its [3G] TD-SCDMA standard.'

In a separate filing with the Hong Kong stock exchange, China Mobile reported the acquisition of mobile-phone distributor China Topssion Communications for 237 million yuan in cash.

China Mobile chief executive Li Yue said the acquisition would strengthen its influence on the supply chain for devices, which will help it lower the cost of handsets and boost its ability to attract new customers, especially for 3G services.

Shares of China Mobile were down 1.66 per cent to HK$71 in trading yesterday. It proposed a final dividend of HK$1.60 per share together with an interim dividend of HK$1.40.