Despite the relatively healthy results, the figures reveal one of the lowest increases in revenue since China Mobile went public in 1997. Over the past four years, it averaged sales growth of 60%. At the same time, the company also announced it would trim spending by 3.5% to $5.6bn this year, and would spend a combined $15bn through to 2005.
What has made the news however, is the fact that China Mobile will pay a dividend, the first time for a Chinese telephone company. It announced it would pay HKD 0.32 ($0.04) per share. The payout is a fifth of its earnings, and more than the average HKD 0.28 expected by seven brokerages surveyed by Bloomberg News. The company also plans to steadily raise dividends.
Looking to the future, China Mobile’s chairman and CEO, Wan Xiaochu, observed that pace of development in mainland China’s economy is higher than many other regions in the world, and the demand for telecommunications services is exuberant.
China Mobile provides cellular services in 21 provinces in China to approximately 120 million subscribers, at the end of January. The country has become the world’s largest mobile telecommunications market, and the fact that it has a relatively low mobile telecommunication penetration rate, with barely two in five people owning a mobile phone, means the potential for growth is enormous.
However, there have been concerns that the Chinese mobile market is slowing. A report jointly produced by The Yankee Group and BDA China Ltd in December said that subscriber growth had slowed down last year. A big concern was also that low-end pre-paid subscribers were the main source of growth, which is driving down average revenue per user for the mobile operators.
This is reflected in China Mobile’s results. It reported that ARPU in 2002 was CNY 115 ($13.9), down from CNY 145 ($17.5) in 2001. Its churn rate rose to an average 0.69% a month, compared with 0.58% in 2001.
China Mobile is also facing increased competition from the number-two ranked Chinese mobile operator China Unicom Ltd with its 42 million subscribers. In January, China Unicom completed the purchase of nine provincial cellular networks from the state-owned China United Telecommunications Corp, for a total of CNY 22.5bn ($2.72bn). It is also giving away free phones and is dropping call rates to meet subscriber targets. This, in turn, has forced Chine Mobile to cut prices, which then lowered its ARPU.
Source: Computerwire
