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China Mobile profit rises 1.1%
Published on: 2010-04-21
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HONG KONG—China Mobile Ltd., the world's biggest mobile operator by subscribers, said its first-quarter net profit edged up 1.1%, a sharp slowdown in earnings growth as competition intensified and the company added low-income subscribers in rural areas.

China Mobile has faced increasing competition over the past year from China Unicom Ltd. and China Telecom Corp., as well as higher marketing and depreciation expenses for its third-generation mobile services. Analysts say these factors are likely to continue to weigh on the company's profitability this year. How quickly China Mobile adds 3G wireless subscribers will be crucial in determining its competitiveness, they add.

The company, listed on the Hong Kong and New York stock exchanges, said its first-quarter net profit rose to 25.48 billion yuan ($3.73 billion) from 25.2 billion yuan a year earlier. Revenue rose 7.7% to 109.09 billion yuan from 101.27 billion yuan. The 1.1% gain in earnings was slower than the company's 5.2% rise a year earlier.

To boost its competitiveness, China Mobile has increased its investments in sales channels, customer service and research and development, Chairman Wang Jianzhou said in a prepared statement. The company also has taken steps to control costs, he said.

China Mobile's average revenue per user—a key industry barometer to determine the long-term growth rate of telecommunications companies—slipped to 70 yuan in the first quarter from 73 yuan a year earlier because of a drop in mobile tariffs. New subscribers were mainly low-end users, the company said.

China Mobile doesn't disclose earnings forecasts.

CLSA analyst Elinor Leung said the company's average revenue per user will likely continue to decline, with increased competition possible in the year's second half.

China Mobile said Tuesday that it added six million subscribers in March, up from 5.5 million in February. The March gain included 3.4 million 3G subscribers. "The strong net addition of 3G subscribers is a big positive for China Mobile as the company's future profitability hinges on 3G services," said Steven Liu, an analyst at DBS Vickers. "I expect investors to focus on the progress of the company's 3G services as the market has already priced in the lackluster first-quarter results."

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