By Paul Mozur
BEIJING--China Mobile Ltd. (0941.HK, K3PD.SG, CHL) said Thursday
net profit in the first half of the year rose 1.5%, slightly
beating expectations even as the slow growth signaled that China's
largest mobile carrier continues to struggle with competition from
local rivals.
The continued slow growth comes as the world's largest mobile
carrier, with more than 700 million customers, is plowing almost $7
billion this year into building a new, speedier fourth-generation
network as it fights to retain supremacy over rivals China Unicom
(Hong Kong) Ltd. (0762.HK, K3ID.SG, CHU) and China Telecom Corp.
(0728.HK, K3ED.SG, CHA). The large investment, along with an
expected increase in subsidies to boost sales of high-end phones,
has lifted anticipation of the company's future competitiveness,
but also has prompted analysts to warn about flagging profitability
in 2013.
Though China Mobile is far and away China's largest carrier,
profit growth has slowed in part because the company was saddled
with a proprietary third-generation Chinese standard not commonly
used outside the country. Among other problems, that left China
Mobile unable to offer popular phones such as Apple Inc.'s (AAPL)
iPhone. As Chinese consumers have rushed to buy touch-screen
smartphones that run on 3G networks, they have increasingly bought
services from China Unicom and China Telecom.
Nonetheless, China Mobile's revenue growth was helped in the
first half by strong sales of smartphones using its TD-SCDMA mobile
standard. In its earnings report the company said it sold 66
million handsets in the first half.
The world's largest mobile carrier by number of accounts said
net profit for the six months ended June 30 rose to 63.1 billion
yuan from CNY62.20 billion a year earlier. Net profit was higher
than the average CNY62.338 billion forecast of three analysts
polled by Thomson Reuters.
China Mobile's operating revenue in the period rose 10.4% to
CNY303.1 billion from CNY266.53 billion, better than the average
CNY281.42 billion forecast in the poll.
China Mobile also has been hampered by a surge in the use of
applications on smartphones, which has hit revenue growth from
traditional text and voice services. Applications such as Tencent
Holdings Ltd.'s (0700.HK, TCEHY) WeChat allow users to send voice
and text messages free of charge, leading many users to make fewer
phone calls and send fewer traditional text messages.
"There is ... a growing substitution effect brought on by the
Internet business, causing more intense cross-sector competition.
These challenges pose a threat to the Group's market position and
an increasing downward pressure on its development," Chairman Xi
Guohua wrote in its earnings release.
China Mobile declared a first-half dividend of HK$1.696, up from
HK$1.633 a year earlier.
Write to Paul Mozur at paul.mozur@dowjones.com
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