China Mobile’s Fourth-Quarter Profit Falls on 4G Expansion

(Beijing) — Leading wireless carrier China Mobile reported its profit fell 11% year-on-year in last year’s fourth quarter, as it aggressively expanded its data services to keep revenue growing in the face of a home market fast approaching saturation.

China Mobile’s fourth-quarter profit dropped to 20.6 billion yuan ($3 billion) during the final three months of last year, according to calculations by Caixin using company data. Annual revenue rose 12% to 165.7 billion yuan, as the company moved a growing number of users to its high-speed 4G service that encourages money-generating data use.

China Mobile said it ended the year with 849 million mobile subscribers, including 535 million using its 4G service. Its data service revenue grew 30% for the year to 395 billion yuan, easily outpacing its 210 billion in revenue from traditional voice services.

“In the event that the policy environment matches our expectations, in 2017 China Mobile will strive to maintain revenue growth from telecommunications services above the industry average, while also delivering industry-leading profitability,” the company said in a statement.

China Mobile was the last of the country’s big three wireless carriers to report its annual results for 2016. Previously, China Unicom and China Telecom reported their annual profits fell 94% and 10% respectively.

China is the world’s largest mobile market, with more than 1.3 billion subscribers, approximately equal to the nation’s entire population. As the market becomes saturated, competition has heated up as the three carriers vie with one another for subscribers. All three are aggressively promoting 4G, which generates more revenue from data use instead of traditional voice services.

Acknowledging the high expense of building and operating networks independently, China Telecom said earlier this week that it might consider sharing such costs for next-generation 5G service, which is expected to become commercially available in China around 2020.

The stiff competition, combined with high costs for building 4G networks, has weighed on profits and share prices for all three companies. China Mobile shares are up about 5% over the last year, though they fell 2.9% in Thursday trade after the latest results were announced. Unicom shares are flat over that period, while China Telecom shares are down about 5%.

Contact reporter Yang Ge (geyang@caixin.com)