Intense competition dents CMHK revenues

12 Aug 2003

China Mobile (Hong Kong) (CMHK) [NYSE: CHL] witnessed a 16% drop in customer spend in the first half of 2003 and analysts are warning that the trend looks set to continue as market competition intensifies. CMHK, which boasts the largest cellular customer base in the world, is involved in a fierce price war with rival China Unicom [NYSE: CHU] as both attempt to boost subscriber numbers by targeting lower revenue users in rural parts of the country. Alongside the threat posed by Unicom’s recently launched budget pre-pay offerings, fixed line operators China Netcom and China Telecom Corp [NYSE: CHA] have gained a foothold in the market with their limited mobility Personal Access System (PAS) service, Little Smart, which has signed up nearly 20 million users, thanks to prices as much as 75% cheaper than its wireless rivals. Despite such stiff competition CMHK’s subscriber growth continued to be impressive. It signed up 11.41 million users in the six month period – equal to the net additions of 1H2002 – to take the combined subscriber base of its 21 subsidiaries in mainland China to 129.1 million. However, it witnessed a fall in average revenue per user (ARPU) of CNY20, to CNY104 (USD13), as increased reliance on pre-pay users dented revenues. Solace came from the news that total sales rose from CNY55.1 billion to CNY76.7 billion, whilst net income for the period was up CNY2 billion to CNY17.5 billion, though much of this was attributable to the purchase of eight wireless networks from its parent last year.

China