Mixed Fortunes for Chinese Giants

China Mobile Ltd. (NYSE: CHL) and China Telecom Corp. Ltd. (NYSE: CHA) have begun 2009 with first-quarter increases in sales and customer numbers, but have also shown signs that competition in the Chinese market is intensifying.

China Mobile, which had 477.2 million customers at the end of March 2009, reported a 9.2 percent year-on-year increase in revenues to 101.3 billion Yuan Renminbi (US$14.84 billion) for the three-month period to the end of March, and an increase in net income of 5.2 percent to RMB25.2 billion ($3.7 billion).

But its share price dipped 4.5 percent to close at $45.84 on the New York Stock Exchange Monday as the operator's numbers showed some negative trends: Its subscriber growth rate is slowing, its average revenue per user (ARPU) is falling, and its customers are using their phones less.

China Mobile added 19.9 million new subscribers during the first quarter, compared with 21.14 million new subscribers in the fourth quarter of 2008.

Its first-quarter monthly ARPU averaged at RMB73 ($10.69), down from RMB83 ($12.16) during the previous three-month period. On average, China Mobile's customers used 478 minutes of airtime during the first quarter, down from the fourth quarter's 487 minutes.

The operator blamed the "negative impact of the slowdown in macro-economic development," the "increasing penetration rate of mobile telecommunications which lessens potential growth in the number of new subscribers," and "the restructuring of the industry which intensified competition" as the reasons for the slowdown in its subscriber growth rate.

It added that its new subscribers "are mainly low-end users," and that this was affecting its ARPU and voice usage rates.

Not all the numbers headed south, though. China Mobile now has 384.3 million users of its Wireless Music service, a sequential increase of 28.8 million, while its SMS usage volume hit 174.2 billion messages during the first quarter, up from 157.6 billion in the fourth quarter.

The operator is currently building out its 3G network that's based on the TD-SCDMA standard, which was developed in China. (See China’s Operators Prep Next 3G Wave and China Mobile's Ahead of Schedule.)

China Telecom, meanwhile, reported a near 15 percent year-on-year increase in revenues to RMB50.9 billion ($7.46 billion) but a 27.4 percent decrease in net income to RMB4.7 billion ($688 million). Its share price fell 1.3 percent to $44.89 by the close of trading on the NYSE on Monday.

The operator ended March with 204 million fixed-line subscribers (down 4.35 million from the end of 2008), of which 46.8 million have signed up for broadband services. It also had 32.8 million CDMA mobile customers, up more than 4.9 million from the end of last year.

China Telecom is working hard to boost its CDMA business, which lost a lot of customers during its transfer last year from China Unicom, and is in the throes of launching its 3G EV-DO service in multiple urban markets, as well as launching new services such as mobile IPTV. (See ChinaWatch: Capex Cuts & Contracts and China IPTV Goes Mobile via UTStarcom .)

— Ray Le Maistre, International News Editor, Light Reading

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