China Mobile’s Quarterly Profit Rises on Data Sales Gains

China Mobile Ltd. (941), the world’s biggest phone company by subscribers, posted a 4.6 percent gain in fourth-quarter profit that missed estimates as it sought to add customers using smartphones to download games and videos.

Net income climbed to 33.9 billion yuan ($5.4 billion) in the three months ended Dec. 31 from 32.4 billion yuan a year earlier, according to figures derived from full-year earnings reported to the Hong Kong Stock Exchange today. The company was projected to post a profit of 34.2 billion yuan, according to the median estimate of six analysts surveyed by Bloomberg News. Sales rose 8.7 percent to 144.2 billion yuan.

China Mobile Chairman Wang Jianzhou is battling the disadvantages of a homegrown third-generation network by adding Wi-Fi hotspots, totaling 2.2 million at the end of last year, to attract users of mobile data. That’s allowed it to stay ahead of China Unicom (Hong Kong) Ltd. and China Telecom Corp. (728), both of which offer Apple Inc. (AAPL)’s iPhone. China Mobile said this month it has 15 million iPhone users on its Wi-Fi or 2G networks, as its 3G TD-SCDMA network is incompatible with the device.

“The war to fend off China Telecom and China Unicom has a cost,” Eric Wen, a Hong Kong-based analyst at Mirae Asset Securities, said in an e-mail today, referring to China Mobile missing estimates.

Capital expenditure will rise to 131.9 billion yuan this year from 128.5 billion yuan last year, China Mobile said today in a presentation on its website. The Beijing-based company was projected to spend 130.2 billion yuan this year, according to the median estimate of six analysts surveyed by Bloomberg News.

Dividend Payout

China Mobile was expected to post sales of 140.4 billion yuan, according to the median of eight analyst estimates.

The company said its dividend payout ratio for 2012 will be 43 percent, unchanged from last year, when the full-year payout was HK$3.327 a share. China Mobile listed 86.3 billion yuan in cash and cash equivalents on its balance sheet at the end of December.

“The dividend payout will be a disappointment,” said Jim Tang, an analyst at Shenyin Wanguo Securities Co. in Shanghai. “Many people were looking for an increase. The growth rate is not great for profit, so the payout with cash is what the market expects.”

China Mobile gained 1.1 percent to HK$85.10 as of 2:50 p.m. in Hong Kong trading. The stock has gained 12 percent this year, while the benchmark Hang Seng Index has added 16 percent.

‘Cannot Satisfy Demand’

The carrier is the only one of the nation’s three wireless companies not offering the iPhone, after No. 3 China Telecom added the device last week. China Mobile added Research In Motion Ltd. (RIM)’s BlackBerry Bold 9788 in September in a bid to win over higher-spending 3G users.

“The poor TD-SCDMA network cannot satisfy demand for high- speed data transmission,” Tommy Mok, a Hong Kong-based analyst at RBS Asia Ltd., wrote in a March 12 note to clients. China Mobile “has taken a different route to capture mobile data usage growth in 2011, with faster expansion in Wi-Fi.”

China Mobile said today it had 2.2 million Wi-Fi hotspots as of the end of 2011.

“Wireless data traffic became a major driver of operating revenue growth” last year, China Mobile’s Wang said in the statement.

The company’s Mobile Market app store has 158 million registered customers and has logged more than 630 million application downloads, it said in the statement. Mobile Market has become the world’s largest Chinese-language app store, the company said.

China Unicom

China Unicom has so far failed to use the iPhone to catch up with China Mobile. China Mobile had 655.4 million mobile- phone subscribers, including 53.9 million 3G users, at the end of January, the company said last month.

The figures exceed China Unicom’s 202.9 million mobile customers and 43.1 million 3G users in the same period.

China Unicom and China Telecom are both scheduled to report earnings next week.

China Mobile also announced today that Lu Xiangdong, an executive director and vice president, had resigned due to “his inability to perform his duties as an Executive Director and a Vice President under his current personal circumstances.”

The company said March 3 that Lu was “assisting judicial authorities in the investigation of suspected financial-related issues.”

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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