China Mobile, the world's largest mobile carrier, faces a further squeeze on profit margins as competitive pressures intensify and an expensive buildout of a new 3G network weighs.
The firm, which had 493 million users at the end of June, yesterday posted its slowest interim profit growth since it listed in 1997 and said it expects average revenue per user (ARPU), a key barometer of earnings, to slide in the months to come.
Like smaller rivals China Unicom and China Telecom, which now compete with a full range of services after a major restructuring last year, China Mobile is aggressively moving into rural areas as urban markets become saturated.
"We can't preserve such a (high) margin for the long term," Chief Financial Officer Xue Taohai said.
Its expensive rollout of a new third generation (3G) network is also off to a rough start due partly to an untried domestic standard it has been assigned to develop as part of the government push to encourage homegrown technology.
China Mobile shares ended down 0.2 percent, lagging China Enterprises Index 2.3 percent rise. Its margin on earnings before interest, tax, depreciation and amortization in the first half was 51.6 percent, falling slightly from a year earlier.
China Mobile said last month it had signed up only 1.2 million 3G users and acknowledged it would be difficult to get 3 million by year end, far short of the 10 million the Shanghai Securities News said the firm had originally targeted.