Market competition and increasing mobile penetration are taking their toll on China Mobile, which increased first quarter earnings by just 1.1%.
Net profit reached 25.48 billion yuan ($3.73b) in the first quarter, compared with 25.2 billion yuan a year ago, the company announced yesterday.
Operating revenue increased 7.7% to 109.1 billion yuan, while ebitda rose 3.3% to 55.15 billion yuan.
ARPU also continued to decline, falling from 80 yuan in 4Q09 to 70 yuan in 1Q10, thanks to lower tariffs and fact that “new customers were mainly low usage customers, ” said chairman and CEO Wang Jianzhou.
He attributed the slight gain in profit to “increasing mobile penetration rate” and “intensifying market competition.”
He said the company was investing in sales channels, customer service and network optimisation and had “refined costs” during the quarter.
Mobile competition was expected to intensify now that all three operators have rolled out 3G networks nationwide.
However, thanks to the higher spending on 3G promotion, China Mobile boosted TD-SCDMA subs to 7.7 million, up from 4 million in February.
“The strong net addition of 3G subscribers is a big positive for China Mobile as the company's future profitability hinges on 3G services,” said Steven Liu, an analyst at DBS Vickers, told the Wall Street Journal. “I expect investors to focus on the progress of the company's 3G services as the market has already priced in the lackluster first-quarter results.”