China Mobile Q3 profit beats expectations

World's largest mobile operator sees 1.3 percent gain in third quarter net profit partly due to increase in subscribers, but looks to be stifled with rising handset subsidies.
Written by Liau Yun Qing, Contributor

China Mobile's net profit grows 1.3 percent during the third quarter of 2012, but handset subsidies and its TD-SCDMA 3G network which does not support older models of Apple iPhones may further stifle its bottomline growth.

In results released Monday, the world's largest operator saw a net profit of 31.1 billion yuan (US$4.9 billion) during the quarter ending September. That compares with an average forecast of 30.5 billion yuan (US$4.87 billion) in a Reuters poll of nine analysts.

In a report Monday, Reuters noted that while the telco has built up a vast rural subscriber base, it still lacks premium customers on its 3G data network.

Although it saw average monthly net additional customers exceed 5.4 million, average revenue per user (ARPU) fell to 4.3 percent to 67 yuan (US$10.70) from a year earlier.

China Mobile's spending on handset subsidies during the first half of 2012 was 4.5 percent of its revenue, the newswire noted. However in contrast, rival operator China Telecom spent 8.3 percent of its revenue forthe same.

Citing Hong Kong-based Phillip Securities analyst Philip Mok, Reuters said China Mobile's bottomline "will still be pressured" due to the likely increase in handset subsidies. The key risk to the operator will be the slower-than-expected growth in 3G customers, Mok added.

According to the newswire, China Mobile has been lagging behind China Telecom and China Unicom in attracting 3G users due to its use of Chinese homegrown 3G standard, TD-SCDMA. Previous models of Apple iPhone do not operate on TD-SCDMA networks but the new iPhone 5 has a chip to support the standard.

China Mobile had 698.5 million subscribers at the end of September, including 75.6 million 3G users. Its total number of mobile subscribers in August was 65 percent of the market. Currently, more than 80 percent of China's 1 billion mobile phone users are still on 2G networks, Reuters noted.

However, its 3G users represented only 38 percent of the marketshare as China Telecom and China Unicom gained ground during the month, Bloomberg said in a report Monday.

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