Capex, subsidies weigh on China Mobile net

Fiona Chau & Nicole McCormick
19 Mar 2010

China Mobile increased earnings by 2.3% in 2009, ahead of forecasts, showing the effects of heavy 3G investment and handset subsidies.

The world’s largest cellco by subscribers reported a 9.8% increase in full-year sales to 452.1 billion yuan, with ebitda up 5.8%. Net profit was 112.63 billion yuan ($16.5b), compared to 115.17 billion yuan in 2008.

Last year’s capex bill was 129.4 billion yuan, down 5.1%, as it rolled out its TD-SCDMA network to 238 cities.

It forecast capex this year of 123 billion – 98% of which will be spent on the 2G/3G integrated network - falling to 98 billion in 2011.

But it paid out 11.7 billion on handset subsidies last year and warned it will increase subsidies in 2010 to 15.5 billion yuan.

Analyst Bertram Lai at CIMB-GK Securities in Hong Kong said the handset subsidies “are my biggest concern,” Bloomberg reported.

It increased subscriber numbers 14.2% to 522.28 million - but only 3.4 million of these are on its 3G network.

Chairman Wang Jianzhou said told reporters at a briefing on Thursday that it aimed to raise this to 10 million by the end of the year.

He called on Apple to develop a TD-SCDMA version of the iPhone.

“Our talks with Apple on iPhone are still going on, and we’re hoping we’ll come to an agreement as soon as possible,” Wang

He said the company was also interested in bringing iPad to the China market.

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