China Mobile lifts smartphone subsidies to $3b

China Mobile is boosting spending on handset subsidies by 30% to lure more smartphone customers to its struggling 3G network, in response to increased competition from rivals China Unicom and China Telecom

 

China Mobile chairman Xi Guohua said the operator would raise handset subsidy spending to 26 billion yuan ($3.14 billion) in 2012 from the originally forecast 20 billion yuan, and maintain its capex at 131.9 billion yuan.

 

Xi said the increment will be used mainly for subsiding TD-SCDMA smartphones, in hopes this would attract more new customers to its 3G networks as well as encourage existing 2G customers migrate to the high-value 3G services.

China has seen rapid growth in smartphone adoption since 2011, and expects there would be an exponential growth this year, as consumers replace their handsets more frequently, Xi said at the company’s earning conference.

 

China Mobile, the world’s largest mobile carrier by subscribers, said Thursday its first half net profit rose just 1.5% to 62.2 billion yuan ($9.77 billion), while EBITDA fell 0.9% on year to 23 billion and net profit margin declined by 1.2 percentage points to 23.3%.

 

The company blamed the slowing growth on rising costs, increased mobile penetration, intensified competition from rivals, and the impact of new technologies and services that are replacing traditional communications offerings.