Opinion | China Mobile hit by bad Wi-fi bet
China Mobile's poorly performing Wi-fi business appears to be a big factor eroding its profits, and the service could quietly be retired in the next few years
Against that backdrop, I was expecting China Mobile's latest quarterly results to show stagnant or falling profits and revenues per user, reflecting falling SMS use as subscribers flocked to cheaper equivalents like WeChat. The latest results do indeed show weak profits and falling user revenues, but the culprits don't appear to be related to the WeChat dispute. Instead, a major factor behind the company's earnings woes appears to be its struggling Wi-fi service that is starting to look like a dud despite massive investment over the last two years.
A closer look at some of the more detailed figures showed that average revenue per user (ARPU), a widely watched industry metric, dropped to about 10 per cent from last year to 63 yuan per month. But this drop in ARPU has been happening for years now as mobile technology matures and becomes more widespread, so it seems a bit unfair to suddenly start blaming Tencent and WeChat for the problem.
China Mobile's SMS traffic actually rose about 5.5 per cent during the quarter, which was more than double the growth rate for the company's subscriber base. That fact would seem to discredit China Mobile's claims that WeChat is hurting its SMS business, even though the broader trends for SMS have been less positive over the last two years. Mobile Internet use also rose a healthy 14 per cent, as more people accessed the Internet over their smartphones.