Business Day (Johannesburg)
Mark Lee
22 October 2009
Beijing — China Mobile this week became the world's first phone company with more than half a billion subscribers as price cuts lured new users, helping the carrier's profit rebound from its only profit drop in a decade.
Third-quarter net income rose 2,6% to 28,6-billion yuan (4,2bn) from 27,9-billion yuan a year earlier, according to figures derived from nine-month earnings reported by the Beijing-based company on Tuesday. Sales climbed 9%.
China Mobile cut call fees and raised handset subsidies to attract 15,24-million users in the quarter as chairman Wang Jianzhou expands in lower-income rural areas to fend off mounting competition from China Telecom and China Unicom (Hong Kong).
China Mobile stock fell 1,9% to close at HK77,25 in Hong Kong trading as earnings missed some analysts' estimates, underscoring the slowing subscriber growth in the world's largest phone market.
"I don't think 500-million subscribers represents any sort of a plateau," said Bertram Lai at CIMB- GK Securities in Hong Kong.
He rates China Mobile shares "neutral". "There is plenty of upside, although the growth in subscribers will be at a decreasing rate."
"China Mobile is delivering what its valuation reflects, virtually no earnings growth," Macquarie analysts wrote in a report yesterday.
The earnings report prompted Macquarie to cut its projection for the company's profit this year by 1,8%, its 2010 net income outlook by 3,2% and its share-price estimate by 4,6% to HK83.
China Mobile is the worst- performing stock among the three Chinese phone companies this year, having lost 0,7%. China Telecom has risen 29% and Unicom is up 18%.
Profit at China Mobile declined for the first time since 1999 in the second quarter as the economic slowdown weighed on demand and the government reorganised the industry to raise competition levels.
Fixed-line operator China Telecom acquired a network from Unicom to enter the wireless market, while China Unicom bought a landline business.
China Mobile's third-quarter sales rose 9% to 114,1-billion yuan, according to derived figures.
Earnings before interest, tax, depreciation and amortisation, a measure of cash flow, increased 5% to 57,8-billion yuan, compared with the 58,1-billion yuan median estimate of four analysts in the Bloomberg survey.
The company had 508,4-million subscribers at the end of September, according to its website.
That is more than the populations of the US and Japan.
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