China Mobile posts rare profit decline of 8.8 per cent in Q3

Chinese Internet services are taking away potential revenue from the carrier

Despite its growing customer base, China Mobile, the country's largest carrier, saw a rare decline in profit for the third quarter in the latest sign that rival operators and local Internet companies are eating into its earnings.

In the period ending Sept. 30, the carrier's net profit reached 28.4 billion yuan (US$4.6 billion), a year-over-year decline of 8.8 percent, the company reported on Monday.

The last time China Mobile posted a drop in its earnings was in 2009's second quarter, when profit was down 1.6 percent year-over-year.

The carrier, with over 755 million customers, has been struggling to maintain profit growth at a time when more Chinese are going online with smartphones. During the third quarter, revenue still increased, up to 160 billion yuan for a 12 percent year-over-year increase.

But in spite of the demand for mobile data usage, the carrier is facing "severe difficulties and challenges" with competition in the country's IT industry, the company said in its earnings report.

More services from local Internet firms, such as video and social networking products, are taking potential revenue away from the company, though it's long tried to offer competing services. On Monday, China Mobile said its average revenue per user continued to decline in the period.

At the same time, the company is raising capital expenditures to expand its telecommunication networks. In 2013, expenditures are forecast to reach 190.2 billion yuan, up 49 percent from the previous year.

The carrier, however, maintained optimism in its earnings, pointing to the eventual launch of its 4G services. The nation's authorities plan to issue the 4G licenses before the year is out. Already, China Mobile is building 200,000 4G base stations to provide network coverage across 100 cities.

The carrier estimates it will spend 41.8 billion yuan on building its 4G networks for this year.

China Mobile could also be close to striking a deal with Apple to offer the iPhone, a move that could bring more users to the carrier. In August, Chinese regulators gave approval to four iPhone models that support China Mobile's upcoming 4G network.

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Michael Kan

IDG News Service
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