China Mobile to promote mobile Web business

China Mobile Ltd, the world's biggest wireless operator by subscriber numbers, hopes to improve its sluggish performance by actively promoting its mobile Internet business, as it posted the slowest profit growth in a decade.

Xi Guohua, China Mobile's chairman, said that as more people surf the Web on mobile phones, wireless data traffic has become an important driver of revenue growth.

"Mobile Internet development creates opportunities for mobile carriers," Xi said at the 2012 International Mobile Internet Conference, which was held in Beijing on Tuesday.

To gain an edge in the mobile Internet era, China Mobile implemented a development strategy with the combination of "a smart pipe, open platforms, featured businesses and an integrated interface", Xi said.

The open platforms mainly refer to Mobile Market - the world's largest Chinese language application store set up by the company. In May, the app store had more than 1 million selected apps and more than 200 million registered users.

The company will also launch a variety of services including mobile music, mobile books and mobile payment systems.

Shen Hongqun, deputy general manager of the data business department at China Mobile, said during the same event that the company also plans to launch the Mcloud service, a cloud storage service similar to Apple Inc's iCloud, to Chinese users by the end of the year.

China Mobile, which has signed up close to seven out of every 10 of China's 1 billion mobile phone users, is experiencing the slowest profit growth in a decade due to intensified competition. Only about 10 percent of the company's users subscribed to higher-revenue 3G network services, a much smaller proportion than that of its domestic rivals.

The company's first-half net profit rose just 1.5 percent from a year earlier to 62.2 billion yuan ($9.80 billion). The figure is significantly lower than those of the years before 2008, when it enjoyed double-digit profit growth because of the rapid expansion of its user base.

And due to the proliferation of smart terminals and a growing number of mobile Web surfers, China Mobile's networks are feeling the pressure as data traffic more than doubles every year.

"The data traffic explosion did not add significant revenue to China Mobile, and this is a challenge faced by other telecom operators as well," said Ji Chendong, an analyst at KPMG China.

Meanwhile, domestic competition in the 3G market is intensifying.

China Mobile is racing with China Unicom (Hong Kong) Ltd and China Telecom Corp to grab a piece of the market. However, China Mobile is losing ground because it adopted a homegrown 3G technology with less industry support.

China Unicom, the first Chinese carrier to introduce Apple's iPhone series on contracts, added 3.09 million 3G users in July, while China Mobile attracted only 1.9 million 3G subscribers in the same period.

In a sign of the intense competition, China Mobile's Xi said the company would raise handset subsidies in 2012 to 26 billion yuan from 20 billion yuan to retain customers.

"It could be risky for China Mobile to subsidize TD-SCDMA 3G handsets. And the fierce competition could further narrow its gross profit margin," Goldman Sachs analysts wrote in a research note.