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China Mobile profits rise 9% on SMS
By Financial Times reporters
Published: March 18 2004 8:43 / Last Updated: March 18 2004 8:43

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China Mobile, the country's largest wireless carrier, said on Thursday net profits for 2003 rose 9 per cent to Rmb35.6bn ($4.3bn) as strength in its subscriber base and short messaging service business offset intense competition in voice services.


For the full year revenues jumped 23 per cent to Rmb158.6bn last year, while earnings before interest tax, depreciation and amortisation were up 19 per cent to Rmb92.3bn. Net
profits were Rmb35.5bn. The company declared a dividend of HK$0.36 per share, up 12.5 per cent from HK$0.32 in 2002.

China Mobile said its short messaging service (SMS) business continued to be the primary source of its growth, with the number of messages sent last year soaring to 93.5bn pieces from 40.4bn in 2002.

The company's subscriber base jumped to 141.6m by the end of 2003 with the acquisitions of provincial networks from its parent. Since its listing in 1997 with just two networks, the company has spent about $50bn buying 19 provincial networks in four tranches. The company announced plans last December to purchase the remaining 10 networks from the parent this year, giving it a national footprint.

However, average revenue per user (ARPU) per month continued to decline, dropping 11 per cent to Rmb102 from Rmb115 a year ago, as the carrier faced increasing competition from its wireless rival China Unicom. China Unicom has 94m subscribers and is aggressively expanding its code division multiple access (CDMA) network.

China Mobile's traditional voice service, meanwhile, is threatened by a low-end roaming wireless service, or Xiaolingtong, offered by fixed-line carrier China Telecom.

China Telecom said on Wednesday brisk demand for Xiaolingtong helped boost its 2003 earnings by 52 per cent. The company is also expanding the service to high-end markets such as Shanghai.

Analysts have expressed concerns over the sustainability of China Mobile's rapid earnings growth, which have been fueled by an expansion from purchasing networks from its parent.

Wang Xiaochu, chairman of China Mobile, said on Thursday the company would pursue "organic and external growth" and nurture new contributors to revenue.

One major contributor would be a series of youth market-targeted new services, branded M-Zone, that the company launched last year. The services have won 10m subscribers and contributed 10.2 per cent of the group's revenue last year.

China Mobile's share price dropped 0.65 per cent to HK$24.1 in afternoon trading on Thursday.