Flagging growth and profit from China’s top operators point to slowing market

 Two of China’s largest operators have reported figures for the first three quarters of 2010 that suggest a slowing market.

China Mobile’s profit between January and September was CNY87.2 billion (US$13.1 billion), an increase of 3.9% over the previous year, while revenue rose 7.8% to CNY352.6 billion. However, there was no change in ARPU, which remained at CNY72, while the EBITDA margin fell to 50.4%, a drop of around 1%.

Profit forecasts for Q3 2010 were CNY29.6 billion, and results just exceeded these estimates, with net profit reaching CNY29.65 billion.

In an official release from the firm stated that: "As a result of the increasing penetration rate of mobile telecommunications and the changes in the competition environment of the telecommunications industry, the group's customer growth showed signs of slowing down.”

China Mobile’s customer base saw a rise of 2.9% over last year, with customers now totalling 569.8 million – making it the world’s largest mobile operator.

Meanwhile, rival operator China Unicom reported a fall in profit over the same three quarters, with this year’s net income of CNY3.27 (US$489.8 million) billion a substantial drop from last year’s CNY9.34 billion. The operator’s revenue however saw an increase of 8.9% at CNY125.12 billion, against last year’s figure of CNY114.9 billion.

The increase in revenue is greater than forecast; however, profit is lower than expected - the firm’s costs have risen by 17.7% to reach CNY120.9 billion. Unicom has stated that this is due to its expansion of its 3G and fixed broadband networks, and suggested that the rising revenue from these offerings may not offset its expenses.

Unicom’s fixed-line operations have seen a drop in revenue, but this contrasts the operator’s mobile offering, which has jumped 20% over last year with a revenue of CNY63.59 billion. The revenue from mobile services rose by 16.8% to CNY60.52 billion.

Although they currently represent just 6.5% of overall subscriber numbers, Unicom’s 3G services are being adopted at a rate that now outstrips 2G subscriptions – of the 1.84 million new accounts opened in September, 56.6% were 3G accounts.

The operator is supporting the deployment of its 3G and broadband infrastructure via a US$1.84 billion convertible bond, it announced in September.

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