China Mobile

China Mobile raises capital spending 49pc

Mainland telecoms giant to lift expenditure to 190b yuan amid intense competition from rivals, as it prepares for roll-out of 4G services

PUBLISHED : Thursday, 14 March, 2013, 10:44am
UPDATED : Friday, 15 March, 2013, 5:35am

Telecommunications giant China Mobile will increase capital expenditure by 49 per cent to 190.2 billion yuan (HK$237 billion) this year, from 127.4 billion yuan last year.

The world's largest wireless network operator is facing intense competition from other traditional telecommunications operators, as well as from internet firms that provide voice calls and short messaging services.

China Mobile will continue building its mobile communications networks and enhancing transmission network capability.

The company built a trial fourth-generation (4G) network in 15 mainland cities with about 20,000 base stations last year and plans to extend it by adding more than 200,000 base stations this year.

China Mobile will spend 41.7 billion yuan, or 52 per cent of its network spending, on developing its TD-LTE 4G network. Its state-owned parent has been shouldering the construction costs in the past but is now shifting it to the listed company as it waits for regulators to issue 4G licences.

Chairman Xi Guohua said he expects 4G licences to be issued around the end of this year, echoing remarks by a Ministry of Industry and Information Technology official last week.

Independent industry commentator Xiang Ligang said the move shows the company is expecting the central government to issue 4G licences soon. He thinks Beijing may grant them as early as the second half of this year.

Xiang said China Mobile has lagged behind its rivals China Telecom and China Unicom in attracting 3G users and needs to better prepare itself for competition in the 4G era.

Just 13 per cent of its users are on 3G, compared with one-third at China Unicom and 44 per cent at China Telecom.

Xue Taohai, China Mobile's vice-president and chief financial officer, said the firm has no need to raise funds for the investment, as it has enough cash and bank deposits - 408 billion yuan by the end of last year - and also "we have a strong ability to generate cash flow".

The company plans to spend 27 billion yuan this year on handset subsidies to lure high-end 3G customers. It spent 23.8 billion yuan on such subsidies last year.

Xi said the growth driver this year will be data traffic, as increasing numbers of subscribers are downloading movies, games and music on their handsets. Revenue from data services increased 19.4 per cent to 166.3 billion yuan, comprising 29.7 per cent of total revenue, compared with 26.4 per cent in 2011.

Voice calling is still the firm's mainstay, contributing 65.7 per cent of total revenue.

China Mobile had 710.3 million subscribers at the end of last year, up 9.3 per cent from a year earlier. However, its market share declined to 63.9 per cent from 66.5 per cent in 2011.

The carrier had 714.7 million mobile-phone subscribers at the end of January, including 95 million 3G users, data released last month showed.

The firm posted a 2.7 per cent rise in net profit to 129.3 billion yuan, the slowest growth in three years. Operating revenue went up 6.1 per cent year on year to 560.4 billion yuan.

China Mobile shares closed 0.24 per cent higher at HK$83.35 in Hong Kong trading yesterday, roughly in line with the Hang Seng Index.