China Mobile (Hong Kong), the SAR-listed arm of the mainland's dominant cellular carrier, says its rivals risk long-term profitability should they continue subsidising handsets for their customers. The warning came as No 2 carrier China United Telecommunications teamed up with handset vendors to provide more subsidised promotion packages for its code-division multiple access (CDMA) network. China United said it had signed up one million CDMA users over the past three weeks to reach four million users as of Monday. China Mobile chairman Wang Xiaochu said: 'We hope [China United] will change this [marketing strategy] when its CDMA operation reaches a sizeable scale.' Mr Wang warned that handset subsidies would have a huge impact on the finances of mobile carriers and would hurt their long-term earnings. China Mobile bought 300,000 handsets to promote the launch of its GPRS services, but Mr Wang said it would stop such promotional campaigns. He said China Mobile would make a one-time provision for the cost of the GPRS handsets, adopting a different accounting policy to those of China United and fixed-line giant China Telecom. 'To write off the cost in one go is a more honest financial treatment,' he said. China United and China Telecom both defer the recognition of certain revenues and costs. Mr Wang was speaking on the sidelines of a roadshow in Shenzhen to market the company's planned sale of eight billion yuan in bonds to domestic investors. A banker helping China Mobile to sell the bonds said the carrier might disappoint investors by paying just 8 per cent of this year's profit as dividend. China International Capital Corp (CICC) said in a research report on China Mobile's bond issuance that it expects the carrier to pay 2.5 billion yuan to investors for the current financial year. The bank forecasts China Mobile to record 31.51 billion yuan net profit for this year, representing year-on-year growth of 11.9 per cent. CICC's forecast translates into a 12.7 fen (about 11.97 HK cents) dividend payment per China Mobile share. Based on China Mobile's closing price yesterday of HK$20.15, the projected dividend yield would be 0.6 per cent. Commenting on CICC's projection, Mr Wang said China Mobile would not pay out a large portion of its profit in dividends as the company needed to preserve capital to develop its business. 'China Mobile is still a very high-growth company,' Mr Wang said. 'Our dividend payment will be reasonable . . . we want to leave some room to gradually increase our dividend payout ratio for the following years.' Most fund managers were expecting China Mobile to pay a dividend yield of between 1 per cent and 2 per cent. Pending listing candidate China Telecom has said it will pay out 6.5 HK cents to investors for next year and a pro rata 1.1 HK cent dividend for this year, representing a dividend yield of around 3.8 per cent to 4.4 per cent.