EARNINGS

China Mobile sees Q3 profit jump an estimated 13 per cent as 4G subscriber base swells

PUBLISHED : Wednesday, 21 October, 2015, 8:48am
UPDATED : Thursday, 22 October, 2015, 12:46am

China Mobile, the world’s largest wireless network operator by subscribers, saw accelerated profit growth in the third quarter on the back of its expanded 4G services, despite the ongoing economic slowdown in its home market.

“We are finally seeing the strong operating performance of China Mobile in 4G translating into improving financials,” Bernstein senior analyst Chris Lane said in a research note.

In a filing with the Hong Kong stock exchange after the market closed on Tuesday, China Mobile reported a 6.5 per cent increase in revenue for the nine months ended September 30 to 512.74 billion yuan (US$80.60 billion), up from 481.23 billion yuan in the same period last year.

Its net profit rose 3.4 per cent to 85.42 billion yuan, compared with 82.60 billion yuan the previous year.

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Based on that nine-month earnings disclosure, a Barclays report estimated the total revenue for China Mobile in the third quarter climbed 9.9 per cent to 172.01 billion yuan from 156.55 billion yuan a year ago.

Barclays calculated a 13.3 per cent net profit growth to 28.16 billion yuan, up from 24.86 billion yuan a year earlier.

“We conclude that revenue trends are solid,” said Anand Ramachandran, the head of Barclays’ telecommunications, internet and media equity research in Asia, excluding Japan.

Shang Bing, the recently appointed new chairman of China Mobile, said in the company’s filing that the operator had 822.91 million total subscribers as of September 30, of which 247.62 million were on its 4G network.

Bernstein estimated that China Mobile’s 3G subscribers last quarter were down 20 per cent year-on-year to 195 million, while its 2G customers fell 26 per cent year-on-year to 380 million.

Shang said China Mobile has stepped up efforts to convince more customers to make the switch to 4G, supported by the company’s continued 4G network build-out across the country and its vigorous promotion of advanced new smartphones.

China Mobile’s 247.62 million total 4G customers at the end of September was short of its full-year target of 250 million.

“They will most likely beat our full-year forecast of 300 million [4G subscribers],” Lane said.

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He added that 4G users now accounted for about 30 per cent of China Mobile’s total subscriber base on the Chinese mainland.

The operator’s addition of high-value 4G subscribers has resulted in stronger mobile data usage and greater monthly average revenue per user, while demand for traditional voice and short messaging services continue to fall.

According to Bernstein, China Mobile’s monthly average revenue per user in the third quarter grew 4 per cent to 62 yuan, up from 60 yuan in the same period last year.

“Given the recent concerns about falling average revenue per user in the past, this is a very clear turnaround for the company,” Lane said.

Analysts expected the major initiative by China Mobile to rapidly deploy 4G infrastructure in the country’s rural areas would to lead to more service upgrades and higher monthly average revenue per user.

Shares of China Mobile slid 0.26 per cent to close at HK$95.70 (US$12.35) at the end of trading on Tuesday.