March 20,2009

China Mobile 2008 Performance Down, Particularly in the Fourth Quarter

By CSC staff, Shanghai
The 2008 performance of China Mobile, China’s largest mobile telecoms operator, has disappointed the market, as the company, with 457 million users, is suffering from the economic crisis.
On March 19, China Mobile presented its annual report, showing an operations income of 412.3 billion yuan, a growth of 15.5% year on year, but the lowest in the past five years. China Mobile has maintained annual income growth of over 20% since 2004, between then and 2007 showing growth of 21%, 26.3%, 23.3% and 20.9%, respectively.
Although the performance was near analysts?earlier expectations, China Mobile’s share price dropped 2.86% yesterday after the company’s disclosure and closed at HK$66.7, down 2.056%.
China Mobile Financial Director Xue Taohai said in 2008 the company’s average revenue per user (ARPU) had dropped to 83 yuan, and would continue to decline in 2009, as most new clients were low-end users.
According to China Mobile Vice President Lu Xiang Dong, at present the company’s user loss rate is stable, mainly led by the decline of the economy, and its influence is quite limited.
CCTV, China’s national television network, recently criticized China Mobile’s Shandong Branch on a program focusing on consumer rights, claiming China Mobile was abusing its user information and inflicting spam on its users. Two days later, China Mobile held a national meeting to arrange an anti-spamming campaign.
In 2008, Focus Media, a NASDAQ-listed outdoor advertising company, was forced to shut down its mobile business department after being exposed on the same program for spamming.

China Mobile’s earnings before interest, taxes, depreciation and amortization (EBITDA) totaled 216.5 billion yuan in 2008, an increase of only 11.6%, while growth in 2005, 2006, and 2007 was 24.8%, 19.7%, and 21.6%, respectively.
The slowdown was most obvious in the fourth quarter, when net profit was 30.2 billion yuan, up only 11% year on year, the lowest growth since the first half of 2007.
China Mobile Chairman Wang Jianzhou blamed the influence of the global financial crisis and increasingly mature mobile markets in big cities, and predicted 2009 growth would continue to slow, due mainly to the macroeconomic situation and challenges from inside the industry. 
As for its A-share listing plan, Wang Jianzhou said the company has ceased preparation for its listing due to the present slumped capital market.



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