April 21, 2008 / 9:32 AM / 11 years ago

UPDATE 2-China Mobile Q1 net jumps 37 pct on new users

(Adds details)

By Vinicy Chan and Sophie Taylor

HONG KONG/SHANGHAI, April 21 (Reuters) - China Mobile (0941.HK), the world’s top cellular carrier, increased quarterly net profit by 37 percent, slightly below forecasts, on strong subscriber growth, but average revenue per user slid as many of the new users were rural, low-end subscribers.

As market saturation slows the growth of new mobile subscribers in big cities, China Mobile and smaller rival Unicom (0762.HK) are pushing to sign customers in less-affluent smaller cities and rural areas of the world’s largest telecoms market.

Both face the threat of a long-awaited restructuring of China’s telecoms sector, which analysts expect to result in fixed-line players China Netcom (0906.HK) and China Telecom (0728.HK) being granted entry into the mobile business, creating new rivals.

Average revenue per user, a key performance indicator, fell to 82 yuan per month at end-March from 91 yuan at end-December.

“There was a big drop in ARPU. The market may take this negatively and there could be some profit-taking. But if you look at last year, there was a big decline in ARPU because of Chinese New Year,” said Francis Cheung, analyst at CLSA.

China Mobile, which dominates the world’s biggest telecoms market, posted January-March profit of 24.1 billion yuan ($3.44 billion), compared with 17.56 billion yuan a year earlier.

The result fell slightly short of an average forecast for 24.65 billion yuan, according to four analysts polled by Reuters Estimates.

(For the earnings statement, please click on: here 0421248.pdf).

“China Mobile’s headline figures look strong and it will continue to outperform peers,” said Marvin Lo, analyst at Daiwa Institute of Research.

Quarterly operating revenue grew 19.7 percent to 93.02 billion yuan.

LOW-END USERS

Average monthly net additional subscribers for January-March reached 7.6 million, up by more than a third from the average monthly net additional subscribers of 5.68 million of last year.

By end-March, China Mobile had 392.14 million subscribers.

“However, as the new subscribers are mainly low-end users and tariff adjustments are steadily and gradually introduced in the first quarter, ARPU and average revenue per minute of usage recorded a decrease,” Chief Executive Wang Jianzhou said in a statement.

Margins on earnings before interest, tax, depreciation and amortisation (EBITDA) rose 22.2 percent to 49.78 billion yuan.

The longer-term prospects for China’s mobile operators depend on when China’s home-grown third-generation (3G) technology takes off, as the arrival of 3G — which will offer faster Internet access and improved video streaming — may open up new sources of revenue for operators.

One potential risk to China Mobile’s growth is that a restructuring of telecoms sector may bring increased competition, analysts have said.

China Mobile shares closed up 2.4 percent at HK$134.70 on Monday ahead of the results. The shares fell 16 percent in January-March, in line with the Hang Seng Index .HSI. (Editing by Ian Geoghegan)

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