China Mobile to launch a new media company: report

People visit the stand of China Mobile during an exhibition in Nanjing, East China's Jiangsu Province

China Mobile, the world's largest mobile operator by subscribers, was reported on Thursday that it will launch a new media company that integrates several of its existing businesses.

This is seen by experts as an important move for the company to develop over-the-top (OTT) services.

The mobile operator will seek to integrate five of its business units - music, reading, games, comics and animation, as well as video - to form a new media company, a source was quoted by news portal sina.com as saying on Thursday.

China Mobile has already started preparations for the launch of the company, the source said.

China Mobile did not comment when reached by the Global Times on Thursday.

Analysts said it is an important step for China Mobile to promote OTT services, such as Wechat, which refers to value-added telecommunications services like audio and video that are directly transmitted to customers' homes through the Internet.

"China Mobile has been confronted with strong challenges from these Internet firms" such as Tencent, which offers new media services such as video service and instant messaging service through mobile app stores, often for free, and thus "China Mobile's text messaging services have been seriously affected," Wang Jun, analyst at Analysys International, a Beijing-based Internet consultancy, told the Global Times on Thursday.

Wang said China Mobile's poor business performance, as described in its half-year report, also indicated that the firm needs transformation.

The net profit of China Mobile declined 8.5 percent in the first half of this year to 57.74 billion yuan ($9.4 billion) year-on-year, according to its half-year earnings report released on August 10.

The telecom operator attributed the fall in profit to rapidly increasing investment in equipment amid fast growth in data traffic, according to the report.

"The substitution effect on the traditional telecom business by OTT business will be aggravated," China Mobile Chairman Xi Guohua was quoted by Xinhua News Agency as saying during a press conference about the company's half-year report on August 14.

"China Mobile will do something regarding OTT service," Xi was quoted by sina.com as saying on August 14.

Despite its big hopes, China Mobile still has weaknesses that will hinder it in developing its new media services, according to Wang of Analysys International.

As a traditional State-owned enterprise, "China Mobile finds it difficult to adjust its business and operation model to be more like an Internet company, which can give up short-term profits and attract huge investments within a short period of time," Wang noted.

Some media reports also said Thursday that China Mobile will lay off around 300,000 employees who were contracted with a third party to work for the telecom operator.

But Xinhua News Agency later reported on the same day that China Mobile denied it as a rumor.