China Mobile warns of revenue pressure due to price cut

HONG KONG (Reuters) - China Mobile, the world’s biggest mobile phone operator by subscribers, warned on Thursday of revenue pressure as it plans to cut prices by more than 30 percent this year in response to a government initiative.

FILE PHOTO: A man walks past the China Mobile logo at the Mobile World Congress in Barcelona, Spain, February 28, 2018. REUTERS/Sergio Perez

China’s central government in February asked state-owned telecom operators to continue to “raise speed and drop price” as it seeks to deepen the sectors’ reform.

China Mobile chairman Shang Bing told a media briefing in Hong Kong it expected average revenue per user (ARPU) in 2018 to drop due to the planned price cut, but said the group aimed to grow its profit by improving efficiency and service offerings.

China Mobile’s profit for 2017 rose 5 percent to 114.4 billion yuan ($18 billion), it reported earlier in the day, just ahead of analysts’ estimates. Revenue rose 4.5 percent from a year earlier to 740.5 billion yuan, just below estimates.

China Mobile, which is spearheading China’s 5G development, is planning to launch trial 5G services in 2019 and full commercial services in 2020.

It earmarked capital expenditure of 166.1 billion yuan for 2018, including investment for carrying out 5G tests in 17 cities this year, Shang said.

“We are not interested in getting there first only in name with non-standard 5G,” chief executive Li Yue said. “What we want to build is 5G for personal use and for industry applications.”

The company is aiming to add 50 million more 4G mobile network subscribers in 2018, Li said, after the number rose by 114 million to 650 million in 2017.

It also aims to add 21 million more household broadband users and 120 million “Internet of Things” smart connections in 2018.

China Mobile announced a final dividend of HK$1.582 per share for the year ended December 2017.

($1 = 6.3187 Chinese yuan renminbi)

Reporting by Anne Marie Roantree and Sijia Jiang; Editing by Shri Navaratnam and Mark Potter