Phone
Third-quarter net income rose 2.6 percent to 28.6 billion yuan ($4.2 billion) from 27.9 billion yuan a year earlier, according to figures derived from nine-month earnings reported by the Beijing-based company yesterday. The carrier was expected to post profit of 29 billion yuan, the median of seven analysts estimates in a Bloomberg survey.
China Mobile cut call fees and raised handset subsidies to attract 15.24 million users in the quarter. Chairman Wang Jianzhou plans to sustain the companys expansion in lower- income rural areas as China Telecom Corp. and China Unicom (Hong Kong) Ltd. focus on high-speed services in cities.
“I dont think 500 million subscribers represents any sort of a plateau,” said Bertram Lai, who rates China Mobile shares “neutral” at CIMB-GK Securities in Hong Kong. “There is plenty of upside, although the growth in subscribers will be at a decreasing rate.”
The companys subscribers increased phone usage in response to price cuts in the third quarter, signaling a recovery in consumption, Lai said.
China Mobile, the worlds biggest phone company by market value, fell 0.7 percent to close at HK$78.75 in Hong Kong yesterday before the earnings announcement. The stock has advanced 1.2 percent this year, compared with a 56 increase in the Hang Seng Index.
Economic Slowdown
Profit at China Mobile declined for the first time since 1999 in the second quarter as the economic slowdown weighed on demand and the government reorganized the industry to raise competition. Fixed-line operator China Telecom acquired a network from Unicom to enter the wireless market, while China Unicom bought a landline business.
China Mobile is the worst-performing stock among the three Chinese phone companies this year. Shares of China Telecom, the countrys biggest fixed-line carrier, have climbed 32 percent, while Unicom, the countrys second-largest mobile-phone company, has gained 19 percent.
China Mobiles third-quarter sales rose 9 percent to 114.1 billion yuan, according to derived figures. Earnings before interest, tax, depreciation and amortization, a measure of cash flow, increased 5 percent to 57.8 billion yuan, compared with the 58.1 billion yuan median estimate of four analysts in the Bloomberg survey.
Turned Corner
“It will be very tough for people to get very excited about this set of results,” said Wendy Liu, who rates China Mobile shares “hold” at Royal Bank of Scotland Group Plc in Hong Kong. “Is a 2 percent increase that much different from a 2 percent decline? It will be tough for people to say they have turned around a corner.”
China Telecom gained 7.5 million mobile-phone users in the three months, compared with additions of 6.44 million in the previous quarter.
The carrier yesterday posted a 47 percent drop in third- quarter profit to 2.98 billion yuan on an increase in spending to market mobile-phone services. The net income, excluding gains from fees China Telecom used to charge to install fixed lines, missed the 3.16 billion yuan median estimate of five analysts in a Bloomberg survey.
Third-Generation Services
China Mobiles spending this year will be focused on upgrading networks to enable them to offer integrated second- generation and third-generation services, the company said in March. The carrier will offer third-generation services in 238 cities by the end of the year, it said.
The companys handset subsidies will increase in the second half as the company seeks to sign up more 3G users, CLSA Ltd. analysts Elinor Leung and Timothy Chan wrote in a Oct. 16 report.
China Telecom started its 3G service in March and has expanded the high-speed network to more than 300 Chinese cities, the company said in August. Unicom this month began commercial 3G services, after starting trials in May.
High-speed mobile phones based on China Mobiles OPhone operating system will go on sale before the end of the year, the operator said in August. Unicom, based in Beijing, said that month that it signed an agreement to offer Apple Inc.s iPhone handset in China.