China Mobile’s 2nd-Quarter Profit Slips

BEIJING/HONG KONG, Aug 20 (Reuters) - China Mobile, the world’s largest mobile carrier by subscribers, posted disappointing second-quarter net profit that slipped from a year earlier, hurt by a weak economy and rising competition.v
The firm along with China Unicom and China Telecom — smaller rivals that now compete with a full range of services after last year’s restructuring — are aggressively moving into poorer rural areas as urban markets become saturated.

China Mobile, moreover, will face intensifying competition in the years to come as an expensive 3G rollout gets off to a rough start due partly to a new domestic standard.

The results were announced on Thursday and put the company on track for full-year profit growth of 4.0 percent — based on a Reuters forecast — the slowest pace in a decade after averaging 26.3 percent over the past five years.

“The lack of handsets and poor network infrastructure are the major problem for China mobile’s home-grown 3G rollout,” said Allan Ng,” a BOCI Securities telecoms analyst.

China Mobile will post flat or slightly lower full-year earnings due to competition from the other two other operators, said Ng.

China Mobile posted a 1.6 percent drop in quarterly profit on Thursday, slipping to 30.1 billion yuan ($4.4 billion) versus a consensus forecast of 31.4 billion yuan, according to Reuters calculations based on previously reported figures.

That compared with a restated profit of 30.6 billion yuan for the second quarter of 2008.

China Mobile posted a first-half profit of 55.3 billion yuan, lagging a consensus forecast of 56.6 billion yuan from a Reuters poll of eight analysts.

The profit figures came at the midday stock market break. Its shares were up 1.14 percent in morning trade, and were 15.0 percent higher during the second quarter, short of the 23.9 percent gain by China Unicom and the 20.6 percent rise from China Telecom.

All three trailed the 35.8 percent surge on Hong Kong’s China Enterprises Index over the same period.

3G LOOMS

China Mobile, which controls almost three-quarters of the country’s cellular market, but a big share of new net additions to its subscriber base is coming from poorer rural areas, eroding average revenue per user (ARPU), a key barometer for tracking profitability.

Its margin on earnings before interest, tax, depreciation and amortisation (EBITDA) in the first half was 51.6 percent, falling slightly from a year earlier.

Regulators have said the country’s three carriers will spend $58.5 billion through 2011, building out their 3G networks, with China Mobile set to spend $8.6 billion this year alone on its TD-SCDMA network, a new standard developed in China.

But the new standard is untested and customers are wary of signing on.

China Mobile said last month it had signed up only 1.2 million 3G users and acknowledged it would be difficult to get 3 million by year end, far short of the 10 million the official Shanghai Securities News said the firm had originally targetted.

China Mobile said net additional subscribers in the first half of the year overall was 35.9 million, pushing its subscriber base to 493 million at end-June.

China Telecom, the nation’s dominant fixed-line phone firm, and China Unicom will report earnings next week.