China Mobile net profit tumbles 10% in 2014

telecomasia.net

China Mobile, the world’s largest mobile carrier by subscribers, has reported its sharpest fall in annual earnings in 15 years, hit by hefty 4G rollout costs, new tax regulations and intensified competition in the market.

Net profit for the year ended December 31 tumbled 10.2% to 109.3 billion yuan ($17.7 billion), compared to the 5.9% decline in 2013.

Operating revenue rose slightly by 1.8% to 641.4 billion yuan, but revenue from telecommunications services fell 1.5% to 581.8 billion yuan.

Voice revenue declined to 309 billion yuan, down 13.1% from a year earlier, while SMS & MMS revenue dropped nearly 16% to 34.8 billion yuan, as the substitution impact of OTT products further intensified.

On the bright side, revenue from mobile data – which is now the operator's primary revenue growth driver - jumped nearly 43% to 150.6 billion yuan, accounting for 26% of telecommunications services revenue.

China Mobile, which launched 4G service a year earlier than rival China Unicom and China Telecom, said its TD-LTE customer base exceeded 90 million last year. The company signed up 39.43 million subscribers, bringing its total subscriber base to over 800 million for the year ended December 31.

The company said 4G APRU was 1.7 times higher the blended APRU, while the monthly traffic from 4G had already surpassed 3G/2G at year-end, with usage per user reaching 780MB per month, 5 times the monthly average DOU.

As a result the company's total mobile data traffic increased by 115.1% to 1.132 trillion MB compared to the previous year. 

Leveraging its first-mover advantage in the country’s 4G market, China Mobile rolled out 720,000 4G base stations covering a one billion population last year.

The company, which poured a hefty 80.6 billion yuan last year into building its TD-LTE network, will trim down its 4G capex this year to 72.2 billion yuan. That said, forecast capex for this year will drop 6.5% to 199.7 billion yuan.

By comparison, smaller rival China Telecom, which reported nearly flat profit for 2014 on Wednesday, had announced plans to invest 60 billion yuan ($9.7 billion) this year to speed up its 4G rollout.

China Mobile CEO Li Yue confirmed that China Mobile has earlier submitted its application to the MIIT for an FDD LTE license. But he insisted that it wouldn’t drive up the forecast capex even if the company was granted an FDD LTE license by the regulator.

“We have mentioned before that a converged FDD/TDD LTE network is important for the global telecom market… One of the main purposes of our intention to apply for an FDD LTE license is to test and build a converged FDD/TDD LTE network,” Li told reporters at a media briefing yesterday. 

Li said the company will continue to accelerate its 4G rollout and extend network coverage this year. The company plans to build one million TD-LTE base stations to achieve 100% 4G coverage and bolster its 4G subscriber base to 250 million by year-end.

The company is also working proactively with vendors to guide the development of the device supply chain to launch 4G devices of more diversified models at more affordable prices, Li added.

In addition, China Mobile will also launch commercial VoLTE later this year and is working with a handful of vendors to introduce new services such as RCS in response to OTT services.

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