China Mobile

China Mobile faces slowing growth in 2017 as quarterly earnings disappoint, analysts say

PUBLISHED : Friday, 21 April, 2017, 2:38am
UPDATED : Friday, 21 April, 2017, 7:14am

China Mobile, the world’s largest wireless network operator, will likely face slowing growth this year after it posted lower-than-expected earnings in the three months ended March 31, according to analysts.

In a regulatory filing hours after the market closed on Thursday, China Mobile reported a 3.7 per cent increase in first-quarter net profit to 24.8 billion yuan (US$3.6 billion), up from 23.9 billion yuan in the same period last year, as it continued to grow its 4G subscriber base and data traffic.

Earnings before interest, tax, depreciation and amortisation (ebitda) — a standard measure of business profitability — advanced 3 per cent last quarter to 67.1 billion yuan from 65.1 billion yuan a year earlier.

Both the operator’s net profit and ebitda “missed our estimates mostly due to the lower service revenue,” Bernstein senior analyst Chris Lane said in a report late on Thursday.

China Mobile’s total first-quarter revenue climbed 3.7 per cent to 184 billion yuan from 177.5 billion yuan a year ago.

That turnover is made up telecommunications services revenue, which was up 6.1 per cent year-on-year to 160.9 billion yuan, as well as sales of mobile phones and accessories, which decreased 10.7 per cent to 23.1 billion yuan.

Lane said service revenue “was below expectations given the strong fixed-line [customer] additions they had over the [past] year.”

At the end of March, China Mobile had 85.7 million fixed-line broadband customers. This group’s average monthly revenue per user was estimated at 32.6 yuan.

China Mobile signed up 33 million new 4G subscribers in the first quarter, which was lower than the 64 million added in the same period last year and 54 million in the three months to December, according to Lane.

“With 66 per cent of the [operator’s subscriber] base now on 4G, this was always expected to happen,” he said.

China Mobile expects 19b yuan in lost revenue, profit in 2018 from further tariff reductions

The company said its average monthly revenue per mobile user last quarter reached 58.5 yuan. It had 856 million total mobile subscribers as of March 31.

The operator’s outlook, however, looks muted as the company continues to cut domestic long-distance and domestic roaming fees, small business lease line charges, and international long distance fees.

“Given that the first quarter is usually a better quarter [for the mainland’s telecommunications network operators] and the announced tariff cuts should happen in the fourth quarter at the latest, we expect China Mobile’s growth rates to deteriorate in the next few quarters,” Jefferies equity analyst Edison Lee said.

China Mobile last month announced that further tariff reduction measures directed by Beijing are estimated to result in about 19 billion yuan in lost revenue and profit next year.

That full-year financial impact of tariff reductions announced by Chinese Premier Li Keqiang in February would coincide with China Mobile’s plan to start key investments in core 5G infrastructure and applications, company chief executive Li Yue said last month.

Li estimated that China Mobile would incur 7 billion yuan in lost revenue and profit this year, based on the cancellation of domestic long-distance and mobile roaming fees from October 1.