China Mobile profit misses estimates

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China Mobile, the world's largest mobile carrier by subscribers, saw fourth quarter profit shrink 16% year-on-year, missing analyst estimates and contributing to its first annual profit decline in 14 years.

The company blamed pressure from messaging services like Tencent's WeChat, as they continued to replace formerly lucrative SMS usage, as well as increased competition from rival carriers.

China Mobile kicked off its high-speed 4G mobile service in December and followed a month later with the long-awaited launch of Apple's iPhone. The company is now trying to lure back customers after its low-quality 3G service saw an exodus to smaller competitors China Unicom Hong Kong and China Telecom.

But costly subsidies, particularly for the iPhone, as well as spending on developing their 4G network and a proposed value-added tax for China's carriers, could all weigh heavily on China Mobile's future profits.

China Mobile's profit fell to 30.3 billion yuan ($4.89 billion) in the three months ending December, as operating revenue rose 5.3% to 630.2 billion yuan ($101.70 billion).

While revenue from data services rose 24% to 206.9 billion yuan, voice revenues, which account for the majority of sales, shrank 3.4% to 355.7 billion yuan.

"The exponential growth in mobile Internet...brought forward fiercer competition across the industry and an era driven by data traffic operation," China Mobile said in its earnings statement on Thursday.

For all of 2013, net profit fell to 121.8 billion yuan - China Mobile's first annual profit drop in 14 years - compared with a 125 billion yuan SmartEstimate of 31 analysts surveyed by Thomson Reuters. Operating revenue last year rose 8.3% to 630.2 billion yuan.

China Mobile shares were down 2.7% on Thursday after the earnings were released, versus a 1.4% drop in the Hang Seng Index.

China Mobile has successfully drawn customers from other networks since launching its 4G service and iPhone. The company gained 466 million subscribers in January while China Telecom lost 800 000 subscribers.

China Mobile's 772 million users made up 62% of China's 1.24 billion subscribers in January, but only 27% of these are signed up to more lucrative 3G contracts, by far the lowest proportion of China's three carriers.

The company is now pushing to get subscribers on to more expensive 4G contracts as data usage revenues become increasingly important and people communicate less through SMS and phone calls.

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