China Mobile posts first profit drop in 14 years

Fiona Chau
21 Mar 2014

China Mobile yesterday reported its first annual earnings decline in 14 years, due to rising 4G costs and fierce competition.

Net profit for the year ended December fell 5.9% to 121.7 billion yuan ($19.6 billion). Revenue rose 8.3% to 630.2 billion yuan last year but was largely offset by surging expenses which grew 15% to 495 billion yuan.

The world’s largest mobile carrier said a number of factors are putting pressure on its operations, including the further accelerated substitution effect of OTT products on the traditional communications business, and a more saturated market with fiercer competition.

China Mobile expects capex to peak this year and in 2015 before declining in 2016, as the company accelerates the buildout of its 4G networks and increases spending on handset subsidies to attract new customers.

China Mobile will spend more than 225.2 billion yuan ($36.2 billion) this year, up nearly 22% from 2013. About 33% or over 74 billion yuan of the capex will be used for 4G network investments, said chief financial office Xue Taohai.

The company will also increase handset subsidies by 29% to 34 billon yuan this year. The subsidies will be used for all models of phones, including the iPhone - which the company launched in January.

The capex budget will also go to investments in 3G, transmission networks, support systems and business developments.

China Mobile, which launched TD-LTE in December, has a total of 1.34 million 4G subscribers in February, with average revenue per 4G user at 180 yuan per month. The total mobile subscriber base reached 776 million in February, of which over 215 million were 3G users.

The company aims to increase its 4G subscriber base to 50 million by the end of this year, while selling a total of one billion TD-LTE smartphones, chairman Xi Guohua said at a media briefing in Hong Kong.

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