HONG KONG: Due to heavy cost on upgrading the company to 4G network, China Mobile has to face its largest annual drop in over a decade as the company’s net profit has decreased more than 10 percent for 2014.
The firm’s net profit was 109.28 billion yuan ($17.64 billion) last year – a 10.2 percent drop from 121.69 billion yuan in 2013, failing to meet analysts expectations.
Costs incurred to promote the faster 4G network dragged profits down, Bloomberg News reported.
The world’s biggest mobile operator by subscribers started selling Apple iPhones for the first time in January of last year and was granted a licence to operate the faster 4G data network in China in 2013.
“The results are slightly below my expectations for both sales and net,” Ricky Lai, a Hong Kong based analyst with Guotai Junan International Holdings told Bloomberg. “The company had to launch incentive programs to migrate 2G subscribers to its 4G network,” Lai said. It comes despite a 5.1 percent increase in customers to over 800 million, it said in a filing to the Hong Kong stock exchange, where it is listed.
Operating revenue was up 1.8 percent at 641.45 billion yuan, while operating expenses were up nearly six percent to 524.11 billion yuan. “We started up 720,000 4G base stations and established the world’s largest quality 4G network covering a population of more than one billion people,” it said in the filing, adding that it was “facing severe challenges from intensified competition”.
In 2013, China Mobile saw its first full year decline since 1999, in what they described as a “crucial year of transformation” and in the face of fierce competition in a saturated market.
