China Mobile, with its number of subscribers exceeding 800 million as of the end of 2014, has posted its biggest yearly profit drop since 1999 due to enormous expenditures on network development.
Profit attributable to shareholders fell 10.2 percent to 109.3 billion yuan ($17.6 billion) in 2014, a result of the company's lavish spending on 4G network development over the last year, China Mobile said in a filing (PDF) to the Hong Kong Stock Exchange on Thursday.
It is the biggest annual profit drop of China Mobile since 1999, Bloomberg indicated. Shares in China Mobile tumbled as much as 3.3 percent at close in Hong Kong on Thursday after the announcement, compared with the 1.5 percent gain of the Hong Kong's benchmark Hang Seng Index.
Amid fierce competition with other major Chinese telcos including China Unicom and China Telecom, China Mobile said it acquired around 40 million new subscribers in 2014, with its total number of 4G users reaching 90 million as of the end of 2015.
Revenue from telecommunications services dropped by 1.5 percent over the previous year, while data business income surged by 22.3 percent to 253.1 billion yuan during the same period, which has "become the primary driver of revenue growth", according to the carrier.
Despite the data income gains, internet-based messaging apps remain a huge challenge to the company, China Mobile acknowledged, adding that "the substitution effect of OTT business has become more intensified". These services compete for customers, and are reshaping the industry landscape.
China Mobile has been facing revenue declines on voice and SMS businesses as wireless-based OTT players have been expanding rapidly in the country. On the other hand, the active user base of Tencent's WeChat has reached 500 million. Tencent on Wednesday announced a 51 percent rise in fourth-quarter profit.
Teaming up with another Chinese telecom equipment supplier, ZTE Corporation, China Mobile has been ambitiously investing in developing its own Rich Communication Services (RCS) facilities. The wireless-based platform that enables "the delivery of voice and SMS, instant messaging, live video, and file sharing across various devices", a WeChat-like service, will be a native function pre-installed in all China Mobile customised smartphones, according to a South China Morning Post report on Tuesday.
Internal testing on the RCS platform has begun among 550,000 China Mobile employees, and the Chinese telco aims to acquire 16 million RCS users by the end of 2015, said the report.