China Mobile H1 profit grows, talking to Apple on iPhones

HONG KONG Thu Aug 18, 2011 6:10am EDT

A China Mobile company flag and the Chinese national flag are reflected in the windows of the China Mobile building in central Beijing September 8, 2010. REUTERS/Petar Kujundzic

A China Mobile company flag and the Chinese national flag are reflected in the windows of the China Mobile building in central Beijing September 8, 2010.

Credit: Reuters/Petar Kujundzic

HONG KONG (Reuters) - China Mobile logged its fastest half-yearly profit growth in nearly three years and said it hopes to soon launch Apple's popular iPhones to accelerate uptake of high-end 3G services.

The world's largest mobile operator by subscribers said it has met with Apple Chief Executive Steve Jobs several times on introducing an iPhone based on its home-grown TDSCDMA network standard.

The companies hope to launch an iPhone as soon as possible, China Mobile's Chairman Wang Jianzhou said, without giving any timeframe.

Though China has a massive growing mobile market, only 80 million are 3G users, with the rest low-end 2G subscribers who mainly own cellphones to make calls only.

As of end-June, China had 907 million mobile phone users, bigger than the entire population of Europe.

China's three telecom carriers have been battling falling average revenue per user (ARPU) as they offer aggressive subsidies to widen their user base in the world's biggest mobile phone market.

China Mobile, China Unicom and China Telecom Corp Ltd are trying to attract 3G and smartphone users by offering subsidized handsets from Apple, Samsung Electronics and HTC for multi-year contracts.

"If you look at the current competition, China Unicom is faring better attracting high end users compared to China Mobile and China Telecom," said Jane Wang, a Beijing-based analyst at research firm Ovum.

"China Mobile, like its competitors, is facing a dilemma of trying to lure more users with subsidies and trying to improve their bottomline because of these subsidies. It's a hard balancing act."

China Mobile's ARPU per month in the first half was 70 yuan, down from 72 yuan during the same period a year earlier.

PROFIT UP

China Mobile, which had 616.8 million subscribers as of June including 35 million 3G users, reported a net profit of 61.3 billion yuan ($9.6 billion) for the six months ended June.

That was roughly in line with an average forecast of 59.8 billion yuan from seven analysts and up from 57.6 billion yuan a year earlier.

First-half profit growth of 6.3 percent was the fastest since an 18 percent increase in the second half of 2008.

The operator already has 7.44 million iPhone users on its network, even though it did not sell the smartphone through its retail network, China Mobile executives said at a news conference after the release of its results.

Apple currently does not support China Mobile's network and iPhone subscribers using the carrier do not have access to 3G download speeds.

Smartphones account for just a fraction of the country's mobile-phone market, prompting Apple to say it was merely "scratching the surface" in China.

Even though China has a huge number of mobile phone subscribers, the penetration rate is only around 70 percent, compared with neighboring Hong Kong's about 200 percent.

"Cross-industry competition arising from the convergence of industries, intensified competition among traditional telecommunications industry players and the slowdown of growth all present challenges," the company said in a statement.

China Mobile shares, which have lost 2.7 percent so far this year, closed down 0.6 percent on Thursday in a broader market that fell 1.3 percent.

(Editing by Chris Lewis and Vinu Pilakkott)

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