China Mobile sees 10.2 per cent drop in profits after 4G network expansion
China Mobile, the world's largest wireless network operator, saw its profit fall 10.2 per cent in the fourth quarter after making huge investments to develop 4G network services across the country.
In a filing with the Hong Kong stock exchange on Thursday, China Mobile chairman Xi Guoha said the company rolled out 720,000 4G base stations to establish "the world’s largest quality 4G network covering a population of more than one billion people".
But that was little comfort to investors as China Mobile's share priced dropped to as little as HK$99.90 in early afternoon trading.
Its fourth quarter net profit reached 109.3 billion yuan, down from 121.7 billion yuan a year earlier. Total revenue was up 1.8 per cent to 641.4 billion yuan, from 630.2 billion yuan the previous year.
Despite the profit decline, Xi said: "The transcending 4G developments established our leading position in the market and laid a solid foundation for the sustainable and healthy development of the company."
In December, China Mobile added a record 19 million 4G subscribers to increase its 4G base to 90 million, a year into its massive roll-out of a network built on the indigenously developed standard called time-division long-term evolution (TD-LTE).
Bernstein Research senior analyst Chris Lane said China Mobile's fourth-quarter results showed it gained revenue share for the first time since the mainland's telecommunications industry reorganisation. That restructuring in 2008 paved the way for the central government to kick-start infrastructure upgrades in the industry after it issued 3G licences to three network operators: China Mobile, China Unicom and China Telecom.
"Previously, many of the mainland's high-value subscribers migrated to Unicom, and to a lesser extent China Telecom, to access better smartphones and faster data usage," Lane said.
"China Mobile now has the advantage because of its 4G network."
Unicom and China Telecom were Apple's first partner-carriers on the mainland for the iPhone because their 3G networks supported the popular smartphone.
China Mobile's slower and less stable 3G network was built on the government-backed standard called time-division synchronous code division multiple access, which did not support the iPhone.
Apple and China Mobile signed their iPhone distribution partnership in December 2013, in time for the operator's TD-LTE service launch.
Unicom and China Telecom have each started tests in a limited number of mainland cities for their "hybrid" 4G networks, combining TD-LTE and the more mature standard called frequency-division duplex long-term evolution.
China Mobile had 806.63 million total subscribers at the end of December.