August 16, 2012 5:29 pm

China Mobile’s technology proves a drag

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As the rest of the world eagerly awaits the expected launch of the iPhone 5 next month, China Mobile is still hoping for an iPhone of any version that will work on its mobile internet network.

Shares in the world’s biggest mobile carrier by users suffered their biggest one-day fall in a year on Thursday, dropping by 5 per cent, after the wireless operator’s results showed it continued to be held back by a homegrown 3G technology that no other mobile network in the world uses.

China Mobile’s net profit margin and average revenue per user, an industry measure, both declined in the first half of this year, missing analysts’ expectations.

Unlike local rival China Unicom, which uses an international standard for its 3G service, China Mobile uses a unique, China-pioneered mobile internet standard called TD-SCDMA. This means that on China Mobile’s networks, Apple’s smartphones cannot access the internet at high speeds.

This has hurt China Mobile. Only about a tenth of its users subscribe to its higher-value 3G service, compared with a third at China Unicom.

Xi Guohua, who took over as chairman in March, said China Mobile’s “lethal” problem was a lack of devices that worked on its unique network. He added that compatible, high-end handsets had become more readily available this year, though it was unclear whether or not that comment referred to the iPhone.

Anand Ramachandran, Asia head of telecoms, internet and media research at Barclays Capital, said: “China Mobile is doing everything right to push its wireless data services. It is leasing more bandwidth, it is spending more on handset subsidies, but it is hamstrung by the technology that the Chinese government told it to adopt.”

China Mobile will not face the same problem when it moves to the next generation of mobile networks, with Japanese telecoms group SoftBank and a number of large Indian networks also considering using the same 4G technology as China Mobile.

“The stock does look quite cheap now but it will look a lot more attractive when the company moves on to 4G,” said Mr Ramachandran.

Mr Xi said the company was on track with its plan to lay down a wide network of next-generation base stations across the country by next year, despite the government giving no indication of when it would start issuing 4G licences.

China Mobile, which has more than twice as many subscribers as the population of the US, said net profit for the first six months grew 1.5 per cent to Rmb62.2bn ($9.7bn) on revenues from its telecoms operations of Rmb266.5bn. It reported a 0.9 per cent fall in ebitda to Rmb123bn and a 1.2 percentage point decline in its net profit margin to 23.3 per cent.

Average revenue per user fell from Rmb71 to Rmb67, which the company blamed on more new subscribers using lower-value second-generation services.

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