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China Mobile profit rises 2.3%
Published on: 2010-03-18
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HONG KONG—China Mobile Ltd., the world's biggest mobile operator by subscribers, reported Thursday a sharp slowdown in profit growth for 2009 as competition intensified and it added low-income subscribers in rural areas.

Earnings growth momentum for China Mobile has been slowing because of increasing competition from rivals China Unicom Ltd. and China Telecom Corp. Higher marketing and depreciation expenses for its third-generation mobile services are also likely to continue to weigh on its profitability this year.

After the commercial launch of its 3G mobile service in January 2009, China Mobile has been striving to improve its network coverage and handset quality to add subscribers.

China Mobile said Thursday the company still sees vast growth potential in the China market, driven by rising rural income and urbanization. The company will speed up the penetration of mobile Internet services such as mobile reading, video and music, it said.

The telecom operator reported net profit for the 12 months ended Dec. 31 rose 2.3% to 115.20 billion yuan (US$16.87 billion) from 112.63 billion yuan a year earlier. The growth rate was sharply lower than the 30% it saw in 2008. Full-year revenue rose 9.8% to CNY452.1 billion yuan from 411.81 billion yuan.

Net profit was slightly higher than the average 114.88 billion yuan forecast of 11 analysts polled earlier by Dow Jones Newswires.

China Mobile said it plans to cut its capital expenditure to 123 billion yuan this year from 129.4 billion yuan in 2009. The mobile carrier also said it will lower its capital spending further to 98.0 billion yuan in 2011 and 80.4 billion yuan in 2012 as it has finished most of the construction of its third-generation network.

China Mobile's average revenue per user—an industry barometer to determine the long-term growth rate of telecom firms—slipped to 77 yuan last year from 83 yuan a year earlier.

Apart from organic growth, China Mobile is also keen on overseas expansion.

"The company will continue to look for investment opportunities in the overseas telecommunications sector and will seek new avenues of growth in international markets," Chairman and Chief Executive Wang Jianzhou said in a statement.

China Mobile said earlier this month it plans to buy a 20% stake in Shanghai Pudong Development Bank Co. for 39.80 billion yuan as the mobile operator seeks to expand into mobile financial services.

China Mobile joins telecommunications operators in Japan and South Korea that have agreements with banks to offer payment services via cellphones as a way to generate additional revenue.

In Taiwan, China Mobile's plans to invest 17.7 billion New Taiwan dollars (US$557.8 million) in Far EasTone Communications Co. remains in limbo as the island keeps its phone-services providers off-limits to Chinese investment.

China Mobile recommended a final dividend of 1.458 Hong Kong dollars (18.8 U.S. cents) a share, up from HK$1.404 a year earlier. It said it will maintain its full-year dividend payout unchanged at 43% in 2010 to reserve cash for future development.

The company's shares rose to HK$76.65 in afternoon trading in Hong Kong, up HK$1.15.

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