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China Mobile's net profit jumps
HONG KONG, China (Reuters) -- China Mobile (Hong Kong) Ltd, the world's top wireless carrier by subscribers, has said its net profit rose 17 percent in 2002, but fierce competition eroded revenue per user by 18 percent. China Mobile, with nearly 120 million subscribers at the end of January, met expectations with a 2002 net profit of 32.7 billion yuan (US$3.95 billion) or 1.71 yuan per share, compared with 28.02 billion yuan or 1.51 yuan per share a year earlier. The company on Tuesday reported 2002 turnover of 128.6 billion yuan compared with 100.3 billion yuan a year earlier. The results were in line with a Reuters poll of six analysts, which forecast net profit of 32.36 billion yuan on revenue of 128.12 billion. Under pressure from investor concerns about competition, China Mobile shares have dropped 12 percent so far this year, underperforming a 3.5 percent drop in Hong Kong's Hang Seng index. The shares were up 4.46 percent to HK$16.40 midway through the trading day in Hong Kong. In a bid to boost its stock, China Mobile proposed its first-ever dividend of HK$0.32 per share for the full year, or a yield of 20 percent. That number was in line with analysts, who expected yields of 10-30 percent. In another share-boosting move, the company also told analysts it may buy back up to 10 percent of its stock. War for share
China Mobile and its rival China Unicom Ltd spent much of 2002 locked in a war for market share, sacrificing profits by offering subsidies and other promotions to build business in the world's most populous market. Competition heated up in the second half of the year as the nation's two fixed-line carriers -- China Telecom and China Netcom -- joined the fray by spending hundreds of millions of dollars to expand their own low-priced wireless systems. Known as Personal Access System (PAS) or "Little Smart," the networks being built by China Telecom and Netcom use existing fixed-line infrastructure to provide a limited-roaming wireless service. China Everbright analyst Frederick Tsang said China Mobile's results this year would depend largely on how the domestic landscape evolves. "It all depends on the competition in 2003," he said. "Financially speaking, the company is quite stable and their cash flow is quite good...We believe the company's development strategy can probably cope with the drop in (the growth rate for) income caused by competition." The effects of the competition showed up in China Mobile's average revenue per user, or ARPU, a widely watched industry barometer, which fell sharply to a pro forma 115 yuan per user per month from 141 yuan in 2001. BNP Paribas Peregrine analyst Marvin Lo previously said he expects ARPU to fall another 15 percent in 2003. "I think the fall will stop in the first half of this year because now is a time of aggressive promotion for Little Smart, so that's an overhang at the moment." Looking ahead, the company announced scaled-back capital expenditures over the next three years, with plans to spend a combined US$15 billion between 2003 and 2005. It said it now planned to spend a combined US$10.5 billion in 2003 and 2004, down from previous plans to spend US$10.8 billion. China Mobile (Hong Kong) has been gradually buying networks from its unlisted parent company, with a goal of eventually having the entire national network in the publicly traded unit. The company acquired eight provincial networks last July, but told analysts on Tuesday it has no immediate plans to buy any remaining networks from its parent. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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