China Mobile's Q4 profit drops 16 percent on 4G network costs
Mobile messaging apps are also taking revenue away from the company
By Michael Kan | Published: 11:22, 20 March 2014
China Mobile posted a rare drop in profit growth for the fourth quarter, as the world's largest carrier is struggling to fend off the competition from rival carriers, and smartphone messaging apps.
During the period, the company's net profit reached 30.2 billion yuan (US$4.9 billion), declining 16 percent year-over-year, the company said Thursday.
Revenue continued to rise, up 10 percent year on year at 167.2 billion yuan.
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While China Mobile may have 767 million customers, it faces the difficult task of squeezing more revenue out of its users by signing them up for pricier data services. At the end of last year, only about a quarter of China Mobile's had subscribed to its faster 3G network, with the remainder on slower network services.
To boost earnings, China Mobile is betting on its new 4G network to create more revenue streams. In December, it launched the higher-speed data services, and unveiled dozens of new smartphones made for the network. But in the short-term, construction of its 4G services is raising costs and dragging down profits.
For this year, China Mobile's capital expenditure budget is projected to reach 225.2 billion yuan, up 22 percent from a year ago.
A bright spot for China Mobile is that it signed a deal with Apple in December to finally sell an iPhone built for its network. Previously, China Mobile was the last remaining mobile carrier in the nation not selling the handset.
In addition, the company also broke a record, and sold 150 million handsets built for its 3G network last year. This marked a 180 percent jump from the prior year.
But even as more of China Mobile's customers move to smartphones, the company has to contend with the rise of mobile apps. In particular, are smartphone messaging products that can replace traditional phone calls and SMS texting. Last year, China Mobile's revenue from voice calls and SMS declined year-over-year by 3.4 percent and 6.5 percent, respectively.