The world’s biggest wireless company in terms of subscribers, China Mobile (HK), is expected to report a disappointing 4% rise in profits for the three months to 31 December 2003 as it continues to cut rates to retain customers and sees its new users spending less. The cellco is widely tipped to report net income of CNY9.3 billion (USD1.1 billion) for the period under review, on the back of a small 1.8% rise to CNY8.73 billion in Q3 profits – its slowest growth for four years. Sales for the final quarter of the year are expected to rise by 12% to CNY41 billion. Full-year profit is predicted to reach CNY35.5 billion, up from CNY32.7 billion, on sales of CNY158 billion. After the meteoric growth of recent years, however, it appears that the party could be over: China Mobile (HK) is now being forced to sustain its growth by signing up users in less-wealthy agricultural areas where average disposable income of CNY2,622 in significantly lower than the CNY8,500 reported in the cities. Although the cellco added an additional 6.6 million users in Q4 to take its total to 141.6 million, according to a survey conducted by Bloomberg, monthly ARPU for the period dipped to CNY99, down 6.6% on the previous year – well below that of companies such as SmarTone and NTT DoCoMo.
In the halcyon days of the late 1990s China Mobile (HK) saw revenues growing at an average rate of 50% per annum as it spent upwards of USD50 billion in acquiring networks from its parent. However, despite China having a market of well over 200 million wireless users, China Mobile is finding it harder and harder to add profitable customers. Added to this, mobile tariffs are being further squeezed by the success of China Telecom’s popular low-end wireless service Xiaolingtong (Little Smart), which grew by 153% in 2003 to 18.35 million users. The strength of Little Smart helped drive China Telecom’s net profit up to CNY24.69 billion in 2003, compared with a restated CNY9.77 billion the year before.
With the Chinese government set to start the tender process for 3G licences this year, the country’s operators will be hoping to benefit from the anticipated CNY100 billion of yearly revenues next-generation services will bring. China is forecast to invest an estimated CNY252 billion in 3G mobile communications in 2006, bywhich time the total number of mobile users in the country is expected to top 400 million.