China Mobile sees annual profit decline

China Mobile Ltd, the world's largest mobile carrier by subscribers, on Thursday posted its first annual profit decline in 14 years, sending its shares down 3.6 percent in Hong Kong trading.

The carrier's net profit for 2013 was 121.7 billion yuan ($19.55 billion), down 5.9 percent from a year earlier, the company said in a financial statement published Thursday. But it was still far higher than profits at the other two State-owned carriers and Internet rival Tencent Holdings.

China Unicom posted a 46.7 percent year-on-year surge in net profit to 10.41 billion yuan last year, while China Telecom also reported an annual net profit growth of 17.4 percent to 17.55 billion yuan during the period.

"The two smaller carriers have continued to attract high-value mobile customers from China Mobile in the past few years, but they have not posed much of a threat to the market leader," Zeng Tao, a Shanghai-based independent telecom analyst, told the Global Times Thursday.

China Mobile saw a 5.4 percent gain in revenue in 2013 and an 8 percent growth in the number of its subscribers, indicating that the market is still growing, he said.

China Mobile blamed its profit decline on increasing competition from over-the-top (OTT) services and rival carriers, as well as heavy expenditure on telecom infrastructure.

Analysts said the popularity of OTT services such as Tencent's free messaging app WeChat has undercut the mobile carrier's revenue from text and voice services. Tencent said Wednesday it had 355 million monthly active users of WeChat by the end of 2013, nearly half of China Mobile's total subscribers.

China Mobile is now depending on 4G services to retain its high-end customers and win back those that it has lost to the other two carriers during the 3G era.

In December 2013, China Mobile became the first of the three mainland carriers to start offering 4G services, and the number of its 4G subscribers amounted to 1.34 million by the end of February, it said. The carrier plans to build 500,000 4G base stations across the country by the end of 2014, which would constitute the world's largest 4G network.

Its two rival carriers have also followed quickly. China Telecom launched 4G services in February and China Unicom launched its 4G services on Tuesday, offering monthly package plans at slightly cheaper prices than the other two carriers.

"The 4G competition has just started, and I believe the tariffs for 4G services will be gradually lowered as competition intensifies," Xiang Ligang, CEO of industry information portal cctime.com, told the Global Times Thursday.

Xiang said mobile carriers always set high prices for the new technology at the initial stage, but as their networks improve they will lower entry barriers to let more users enjoy the high-speed service.

Zeng said China Mobile's profit will continue to decline in the next two years, given the high expenditure required to build its 4G network, rising subsidies for 4G handsets, and decreasing revenue from voice services.

"More than half of China Mobile's revenue comes from voice services, so it will face increasing downward pressure in the 4G era," he said.