China Mobile

China Mobile widens lead in mainland telecoms market with strong interim earnings growth

Operator posted 5.6pc rise in net profit to 60.6 billion yuan. Operating revenue jumps 7.1pc to 370.3 billion yuan

PUBLISHED : Thursday, 11 August, 2016, 3:47pm
UPDATED : Thursday, 11 August, 2016, 10:45pm

China Mobile, the world’s largest wireless network operator, plans to accelerate 4G adoption by its subscribers this year and sees Apple’s iPhone helping it attract more high-end users, after reporting steady interim earnings growth.

“We expect 4G competition to intensify in the second half of this year, so we need to maintain our competitive advantage,” China Mobile chairman Shang Bing said in a press conference on Thursday.

In its filing with the Hong Kong stock exchange on Thursday, China Mobile posted a 5.6 per cent increase in net profit to 60.6 billion yuan in the first six months of this year, up from 57.4 billion yuan in the same period last year.

The operator attributed the “encouraging” earnings expansion to its market-leading operating revenue, which rose 7.1 per cent to 370.3 billion yuan in the first half from 345.7 billion yuan a year ago.

Wireless data traffic also became its biggest source of revenue, with a 39.7 per cent year on year jump to 140.9 billion yuan.

“We generated the largest operating revenue in the first half of 2016 amongst our industry peers,” Shang said, adding it also outperformed them on profitability.

Rivals China Unicom and China Telecom are scheduled to report their own interim earnings in the next two weeks.

China Mobile, which also operates the world’s biggest 4G network, recorded 837.030 million total subscribers at the end of June. Of that number, 428.541 million were 4G users.

Our 4G network has now been expanded to cover more indoor areas in a larger number of places
China Mobile chairman Shang Bing

The operator added more than 200,000 4G base stations in the half to increase its total number deployed across the country to 1.32 million.

“Our 4G network has now been expanded to cover more indoor areas in a larger number of places,” Shang said.

He pointed out that the company would surpass its previous targets of 500 million 4G users and 1.4 million 4G base stations by the end of this year.

The company planned to maintain “sufficient levels of marketing expense in 4G for the rest of this year” to maintain its industry lead, he said.

“The strength of the network was enhanced by the launch of high-quality VoLTE in nearly 300 cities across the country,” he added.

The term VoLTE stands for voice over LTE, which represents high-quality voice calls over the 4G technology known as Long-Term Evolution.

China Mobile chief executive Li Yue said the operator shared Apple’s optimism over the continued strong demand for the iPhone in mainland China.

“The iPhone remains very hot [in the market],” Li said. “We are coordinating with Apple on ways that new functions on the iPhone can best work on our network to benefit our users.”

Apple chief executive Tim Cook last month said the company’s installed base of iPhones in China has grown 34 per cent over the last year, despite a slowdown in the  world’s largest smartphone market.

“According to China Mobile, there are more iPhones on their network than any other brand, with iPhone users ranking first in terms of customer loyalty, data usage and average revenue per user,” Cook said.

Elaine Lai, an equity analyst at Jefferies, estimated in a report published last month that 92 per cent of mobile subscribers on the mainland would convert to either 3G or 4G services by 2018, up from 83 per cent projected for next year.

“In China, the launch of VoLTE heralds the eventual retirement of both 2G and 3G networks,” Lai said.

Operating data released by China Mobile last month showed that it has also ramped up the number of its fixed-line broadband subscribers to 65.8 million as of June 30.

That gave it a 26 per cent share of a market segment dominated by China Telecom, which had 118 million subscribers in the same period.

It is a new milestone for China Mobile made possible by its 31.88 billion yuan purchase last year of the fixed-line network assets of China TieTong Telecommunications Corp, formerly known as China Railway Communications.

Shang said the company is sharpening its focus on delivering advanced information and communications technology services to the corporate market on the mainland.

“In the first half, we served over three million corporate customers,” he said.

In addition, the company had more than 80 million connections to the emerging Internet-of-Things (IoT) market.

IoT refers to the network of devices embedded with sensors and running dedicated software that enables them to automatically collect, store and send data to other devices.

According to the International Telecommunications Union, IoT is already extensively deployed in corporate stock and inventory systems, fleet management, environmental monitoring and many other industrial processes.

The Ministry of Industry and Information Technology has forecast China’s IoT market to be worth 1 trillion yuan by 2020.

“Our digital services are still at an early stage of development and more effort will be needed

to drive new products and further strengthen our capabilities,” Shang said. He pointed out that the number of IoT connections that China Mobile supports will continue to grow this year.