21 April 2019

4G network costs weigh down China Mobile

China Mobile Ltd. (00941.HK) announced after market close Monday weaker earnings for the first nine months of the year. The world’s biggest mobile carrier, which has more than 755 million subscribers, said its net profit edged down 1.9 percent from a year earlier for the January-September period.

As the company’s earnings had positive growth in the first half to June, the latest statement suggests that the telecom giant saw marked deterioration in its business in the third quarter. While China Mobile put the blame on keener competition and immense popularity of “over-the-top”” mobile messaging apps, the average monthly revenue per user was actually quite stable and the SMS usage even soared by half in the third quarter. That indicates that the bottom-line pressure has mainly come from the cost front.

With vigorous marketing push for its exclusive TD 3G services, China Mobile’s handset subsidies surged along with the 23 percent growth in the number of its 3G subscribers during the third quarter. Worse still, the listed blue-chip firm was assigned the task of laying a 4G network nationwide, instead of having another entity from its parent firm take up the work. Given this situation, huge start-up investment could keep the company’s earnings in check for a while.

Amid the prevailing concerns, China Mobile’s American depository receipts (CHL.US) slumped four percent overnight on the New York Stock Exchange. 

– Contact the writer at [email protected]


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