China Mobile’s profit was up 37% year over year due to new mobile phone rates and converting customers from traditional land lines to a cell phone. This news comes as China’s largest landline operator posted growth of just .5% in the same quarter. The trend that has caught on in the US is now gaining steam with Chinese adults who favor having a mobile phone over a fixed phone. As monthly rates drop, mobile phones are now competitive with landlines and provide greater mobility.
Less overhead per customer
China Mobile has a huge advantage over lesser populated markets because of the low overhead. Offices can service more customers, while the company needs less towers to reach the more phones. This cost can be passed onto customers who are now favoring the mobile phone to traditional phone service.
The stock has doubled in just the last year, gaining 200% from last July to November. Now the stock trades at a more modest $135 per share, down from its highs in the upper $150s. The Chinese telecom sector has done well overall, producing average returns of 25% year over year, but nothing compared to the 75% gain made by China Mobile in the same timeframe.
New 3G technology
The company has also grown due to new 3G servicing of multimedia and downloads. 3G service allows for faster downloads of many popular programs and games, which generate even more revenue for China Mobile. The Chinese government has been slow to approve 3G wireless service, but the company expects to go live with 3G in a few cities, namely Beijing and Shanghai. With news like this, it appears like China is taking a look at its neighbor Japan, which has led technology innovation for the last decade.
China Mobile now serves 68% of the Chinese mobile phone industry, sparking concerns of federal regulators and monopoly worries. If the company grows too large, it runs the risk of becoming a nationalized firm. China is set to unseat Germany as the third biggest economy, allowing for further grow of China Mobile.