Bloomberg Beijing
CHINA Mobile’s profit fell for the fifth-straight quarter as the world’s largest carrier by users spent more to encourage subscribers to switch to high-speed data services.
Net income fell 12 percent to 24.9 billion yuan (R45bn) in the third quarter, according to figures derived from nine-month results, the Beijing-based firm reported yesterday. That missed the 26bn yuan median of four analyst estimates compiled by Bloomberg.
Rising costs to roll out its fourth-generation (G4) network, which added 11.4 million users last month, are causing analysts to estimate net income will drop about 10 percent this year, the biggest fall since 1999.
Chief executive Li Yue is cutting $2bn (R22bn) in smartphone subsidies after the government ordered carriers in July to reduce such spending to boost profit.
“We think the company can start to improve earnings in the fourth quarter,” Ricky Lai, an analyst at Guotai Junan International Holdings in Hong Kong, said after results.
“The 4G subscriber additions were better than expected in September at over 11 million. Going forward, we expect the company can improve earnings due to the higher data usage by those 4G users.”
Sales in the quarter dropped 2 percent to 156.6bn yuan, from 160bn yuan a year earlier. That compared with the median 162bn yuan of four analyst estimates compiled by Bloomberg.
The stock rose 1 percent to close at HK$92.85 (R132) in Hong Kong yesterday before the earnings were announced. The stock has increased 15 percent this year, compared with a 1 percent fall in the benchmark Hang Seng index.
The carrier in December reached an agreement with Apple to offer the iPhone after six years of negotiations. China Mobile began selling the device on January 17.
In March, the company said subsidies for all phones would rise 29 percent to 34bn yuan this year, with the introduction of the iPhone being part of the reason. It reversed course in August, saying it would cap this year’s subsidies at 21bn, after spending 15.3bn yuan in the first half.
The state-owned Assets Supervision and Administration Commission told China’s three carriers to cut the amount they spend on subsidies and advertising for devices, such as the iPhone, people familiar with the matter said in July.
When the carrier released the iPhone 6 and 6 Plus last week, it offered no direct subsidies for the hardware. Instead, customers are now offered discounts on calling plans depending on their monthly spending.
On the most expensive plan, the total discount of as much as 3 264 yuan over two years equals about 62 percent of the cheapest iPhone 6.
China Mobile had 799 million subscribers at the end of last month, the company said yesterday. That included 244.5 million users of third-generation services, and 40.95 million on the new 4G network.
Results in the period were also affected by the June 1 imposition of a new value-added tax, as well as a January reduction in fees that the nation’s two smaller carriers pay China Mobile to connect to its infrastructure.