China Mobile (Hong Kong) posted a healthy rise in first-half earnings, but a 25 per cent increase in the dividend payout was not enough to satisfy market watchers, who said the mainland's largest mobile phone operator could afford to be more generous. Earnings rose 7.77 per cent to 18.82 billion yuan, while turnover grew 12.73 per cent to 86.42 billion yuan. China Mobile raised its interim dividend to 20 HK cents a share from 16 cents a year ago. Macquarie Securities analyst Craig Irvine said: 'It was a predictably steady result, but I was disappointed with the dividend.' He pointed to the firm's 5.97 billion yuan in net cash and free cash flow of about US$5 billion. Chairman and chief executive Wang Xiaochu said his policy was to gradually increase dividends, but refused to commit to a firm figure for the full year. The company was facing costly capital requirements for third-generation (3G) network expansion, and did not want to raise the dividend too hastily, Mr Wang said. Although disappointed by the dividend payout, Mr Irvine remained a buyer of the stock. Growth could come from efficiency gains with the acquisition of 10 networks once belonging to the parent company, he said. The dividend translates into a payout ratio of 20 per cent. BNP Paribas Peregrine expected a full-year ratio of 22 per cent. The operator also wanted to issue China depositary receipts, saying that issuing A shares would increase legal risks by adding another layer of management. China Mobile is putting more money into its 2G network, raising full-year capital expenditure plans by 15 per cent to US$6.67 billion. An impending shortage of network capacity could hamper the firm's ability to add new customers without compromising service quality. Tightening network capacity has prompted some industry players to urge the government to quickly issue 3G licences. The operator had 158.63 million subscribers on June 30, up 22.9 per cent from last year. Average revenue per user was 96 yuan per month, down from 104 yuan last year, as China Mobile aggressively marketed its services in rural area. Mr Wang said a crackdown on spam and pornographic content in short messaging and interactive voice response (IVR) services would not hamper growth of the businesses. Last week, China Mobile temporarily suspended the IVR business of Sina.com, while Sohu.com is barred from operating picture services for a year. 'One person who is sick does not mean that everyone will have to take the medicine,' Mr Wang said. China Mobile shares on Wednesday declined 0.23 per cent to settle at HK$21.65.