China Mobile profits slump 9.4% despite strong 3G/4G growth

23 Apr 2014

China Mobile, the world’s largest cellco by subscribers, has registered a 9.4% year-on-year drop in net profits for the three months ended 31 March 2014, driven down by the company’s continued investment in its Time Division Long Term Evolution (TD-LTE) network and the erosion of traditional voice revenues by over-the-top (OTT) solutions. Strong performance in the wireless data segment fuelled operating revenue growth, with turnover reaching CNY154.83 billion (USD25.04 billion), up 7.8% on an annualised basis. The cellco registered net additions of 33.35 million 3G subscriptions, bringing the 3G user base to 224.98 million, as well as claiming 2.79 million new 4G customers at the end of its first full period of offering the service, having activated its TD-LTE network in December last year. After just three months of offering 4G services, China Mobile has become one of the largest 4G providers in the world, leapfrogging most European and Latin American cellcos but remaining a sizable distance behind well-established 4G operators in the US, Japan and South Korea, the largest of which, TeleGeography’s GlobalComms Database notes, claimed more than 40 million 4G users at the end of 2013. Meanwhile, the Chinese cellco’s total subscriber base reached 781.08 million, booking net additions of 13.88 million customers during the three month period. Nevertheless, China Mobile booked a quarter-on-quarter decrease in mobile data traffic, which dipped from 660.8 billion MB in Q4 2013 to 566.8 billion MB in Q1 2014. The cellco also blamed the ‘continued accelerating substitution effect of OTT products’ as well as a general shift towards multiple SIM usage for a decline in voice traffic and ARPU. Voice usage dropped 4.8% q-o-q to 1.043 billion minutes, whilst monthly ARPU dipped by CNY6 to CNY62 over the same period. The erosion of its traditional business, combined with its continued investment in its 4G rollout, led to a 5.9% year-on-year dip in EBITDA to CNY57.59 billion, and a decrease in EBITDA margin of 5.4 percentage points to 37.2% whilst net profits tumbled 9.4% to CNY25.24 billion.

China, China Mobile, China Mobile Communications Group