April 21 (Bloomberg) -- China Mobile Ltd., the phone carrier with more users than the U.S. has people, reported first-quarter profit rose 37 percent after it added customers at a record pace by cutting rates and offering news and instant messaging.

Net income climbed to 24.1 billion yuan ($3.4 billion) from 17.6 billion yuan a year earlier, the Beijing-based company said today in a statement on its Web site. Sales increased 20 percent to 93.02 billion yuan. Four analysts had a median profit estimate of 23.6 billion yuan in a Bloomberg survey.

Chief Executive Officer Wang Jianzhou won subscribers from fixed-line companies China Telecom Corp. and China Netcom Group Corp. (Hong Kong) Ltd. by scrapping charges for receiving calls and offering services including mobile newspapers. The company plans an industry overhaul that may increase competition.]

``China Mobile is penetrating new markets to get as many customers as possible and at the same time roll out new services to retain the subscriber base they have,'' said Christopher Wong, a fund manager at Aberdeen Asset Management in Singapore, which oversees more than $40 billion of investments including China Mobile shares. It's ``trying to run faster than the competitors, as who knows what the government may do from a regulatory perspective.''

The company's stock doubled last year, making it the world's most valuable mobile-phone company, as investors bought into the dominant carrier in the world's biggest wireless market.

Record Increase

China Mobile rose 2.4 percent to HK$134.70 at the end of trading in Hong Kong, compared with a 2.2 percent gain in the city's benchmark index. The company's earnings were announced after the stock market closed.

The company added 7.8 million users last month, for a total of 392.1 million. Subscriber numbers rose by a record 22.8 million in the first quarter, or an average of more than 7 million a month. Smaller rival China Unicom Ltd. on Friday said it added 1.63 million in March for a total of 167 million.

``China Mobile cut fees and traffic has gone up,'' said Tucker Grinnan, head of Asian telecommunications research at HSBC Holdings Plc. He rates the stock ``overweight'' with a share- price estimate of HK$148.

China Mobile's gain in subscribers hasn't been matched by an increase in customer spending as the company focused on rural areas, where the average annual disposable income in the first quarter was 1,494 yuan, a third of the amount for urban dwellers.

The phone operator's average monthly phone bill fell to 82 yuan in the first quarter, from 85 yuan a year earlier.

Market Share

First-quarter earnings before interest, taxes, depreciation and goodwill amortization climbed 22.2 percent to 49.8 billion yuan, the company said. Ebitda was 53.5 percent of sales, up from 52.4 percent.

China Mobile has about a 68 percent share of the nation's mobile-phone market, while Unicom has the balance. China had 565.2 million mobile users at the end of February.

As part of an industry overhaul, the government may order China Unicom, the nation's second-largest mobile operator, to sell its bigger phone network to Netcom, analysts at UBS AG, Morgan Stanley and Goldman Sachs Group Inc. said last month.

Unicom may sell its smaller network to China Telecom, while the parent of China Mobile may acquire fixed-line operator China Tietong Telecommunications Corp., according to the analysts.

3G Timetable

Parent China Mobile Communications Corp. earlier this month started commercial trials of a third-generation wireless service based on a locally developed standard in eight cities including Beijing and Shanghai.

China hasn't set a timetable for issuing 3G licenses that allow for faster downloads of video and music, or said how many it will grant.

China's economy, which may overtake Germany's as the world's third biggest this year, has averaged 10 percent annual growth and expanded 68 times in size since free-market reforms started in 1978.

``The rapid growth in China's economy and the vigorous demand for telecommunications services continued to create a prosperous environment for the group,'' China Mobile Chairman Wang said in the statement.

To contact the reporter on this story: Janet Ong in Beijing at jong3@bloomberg.net

Last Updated: April 21, 2008 07:16 EDT