China Mobile profits unchanged as device subsidies take toll

China Mobile has reported net profit of RMB27.88 billion ($4.5 billion) for the first three months of 2013, just 0.3% higher than in the same quarter of 2012, as efforts to increase the usage of smartphone data services ate into its revenues.

The rate of growth is the lowest that China Mobile (Beijing, China) has reported in three quarters and came despite a 5.7% increase in quarterly revenues, to RMB134.7 billion.

China Mobile has reported net profit of RMB27.88 billion ($4.5 billion) for the first three months of 2013, just 0.3% higher than in the same quarter of 2012, as efforts to increase the usage of smartphone data services ate into its revenues.

The rate of growth is the lowest that China Mobile (Beijing, China) has reported in three quarters and came despite a 5.7% increase in quarterly revenues, to RMB134.7 billion.

The operator added another 16 million customers in the quarter, to give it 726.31 million in total, but saw average revenue per user slide to RMB63 a month, from RMB71 in the final quarter of 2012.

In a statement posted on its website, China Mobile said it was “faced with various difficulties and challenges arising from the increasing mobile penetration rate, unprecedentedly intense market competition and more apparent substitution of traditional communication business by new technologies and new businesses”.

Like smaller rivals China Telecom (Beijing, China) and China Unicom (Beijing, China), it has been subsidising higher-cost smartphones to make them more affordable, hoping to spur usage of more lucrative data services, but the practice has led to an increase in costs.

Although the number of 3G customers rose from 87.93 million in December 2012 to 114.37 million at the end of March, revenue growth has been hit by the popularity of free-to-use over-the-top services like WeChat, an instant-messaging application available from China’s Tencent Holdings (Shenzhen, China).

The operator also appears to be losing the battle against China Telecom and China Unicom to sign up 3G customers, with its share of the market falling to 64% in February from 66% a year earlier, according to a report from Bloomberg.

One obvious disadvantage is the company’s lack of an iPhone distribution agreement with Apple (Cupertino, CA, USA).

Unlike China Telecom and China Unicom, the operator is using a homegrown 3G standard called TD-SCDMA that is incompatible with the various versions of the iPhone.

Although China Mobile has been involved in talks with Apple, the Californian gadget maker has not yet unveiled an iPhone that will run on TD-SCDMA networks.

China Mobile is looking to 4G to reverse its fortunes, and last month said it would boost investment in its 4G network this year by 49%, to RMB190.2 billion, according to Bloomberg.