China Mobile's 4G Boom Fuels Profit Growth

More than half of the operator's subscribers are now using 4G services, while smaller rivals are failing to close the 4G gap.

Iain Morris, International Editor

August 11, 2016

3 Min Read
China Mobile's 4G Boom Fuels Profit Growth

China Mobile, the world's biggest operator, has reported another sharp increase in half-year sales and profits as 4G growth at the business shows no sign of abating.

Operating revenues rose 7.1% in the first six months of the year, to 370.4 billion Chinese yuan ($55.8 billion), compared with the year-earlier period, while profit attributable to equity shareholders was up 5.6%, to RMB60.6 billion ($9.1 billion).

Despite competition from rivals China Unicom Ltd. (NYSE: CHU) and China Telecom Corp. Ltd. (NYSE: CHA), the operator has picked up more than 116 million 4G customers since the end of December to bring its total to more than 428 million.

The performance means that more than half of China Mobile's 837 million customers are now using 4G services.

While most of the 4G growth came from existing customers upgrading to the higher-speed offering, China Mobile's overall customer base grew by nearly 11 million customers in the first six months of the year, to around 837 million subscribers.

The operator's sales increase was fueled by a mixture of customer growth and an increase in average revenue per user, which rose to RMB62 ($9.33) per month from RMB60 ($9.03) in the first half of 2015, driven by the take-up of pricier 4G services.

China Mobile's performance is all the more impressive given 4G rivalry from China Unicom and China Telecom, both of which are relying on the FDD variant of 4G technology -- more widely used in other parts of the world -- as opposed to the TDD system preferred by China Mobile.

China Unicom is yet to report its own half-yearly results, but just 72 million of its 261 million customers were using 4G services at the end of June, up from 49 million in January.

Earlier this month the company warned investors that first-half profits would be around 80% less than in the year-earlier period due to a variety of factors, including an increase in sales and marketing costs, tower usage fees and higher energy charges.

China Telecom, which operates the smallest of China's three mobile networks in terms of customer numbers, had 90 million 4G customers at the end of June, up from 58 million in December, and 207 million subscribers overall.

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In an earnings statement, China Mobile Ltd. (NYSE: CHL) Chairman Shang Bing attributed the ongoing 4G success to the investments the operator has made in network improvements.

"We added over 200,000 4G base stations, increasing the total number of 4G base stations to 1.32 million," he said. "Our 4G network has now been expanded to cover more indoor areas in a larger number of places."

China Mobile has also launched a voice-over-LTE service, allowing phone calls to be carried over the 4G network, and introduced carrier aggregation technology -- which combines spectrum channels to boost bandwidth -- in 300 cities.

Capital expenditure rose 19% in the first six months, to RMB83 billion ($12.5 billion), compared with the year-earlier period, although the operator plans to reduce annual spending to around RMB186 billion ($28 billion) this year from RMB200 billion ($30.1 billion) in 2015.

Nevertheless, Shang emphasized the need to avoid any complacency in future, despite China Mobile's growing dominance.

"We cannot rest on our laurels in this strategically important area for our customers," he said. "We are sure to see increased 4G competition as a number of rival providers are collaborating in network expansion and increasing marketing efforts."

China Mobile's share price closed up 0.68% on the Hong Kong Stock Exchange today.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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