China Mobile Ltd. (941), the world’s largest phone company by users, sees its future in the expansion of fourth-generation service to help it cope with threats including Tencent Holdings Ltd. (700)’s WeChat message app.
The way that WeChat instant messaging replaces traditional telecom services is “quite severe,” China Mobile’s Chairman Xi Guohua said at the company’s annual shareholder meeting in Hong Kong today. The company must boost data usage and investment in 4G services in response, Xi said.
The threat from WeChat adds to pressure from competition with China Unicom (Hong Kong) Ltd. (762) and China Telecom Corp. for smartphone users that has cut China Mobile’s share of the nation’s mobile subscribers to 63.2 percent in April, from 65.7 percent a year earlier. The company is counting on a quick shift to the high-speed fourth-generation service to stem that decline and maintain its market lead within China’s 1.16 billion user market.
“We are rolling out 4G as this represents the company’s future,” China Mobile’s Xi told the meeting today. “Capex investment is a must.”
After building a trial 4G network in 15 cities in 2012, China Mobile in February said it will expand that to 100 cities this year with 200,000 base stations that can reach a population of 500 million people.
China’s government may issue licenses for 4G commercial service around the end of this year, the company said in March.
China Mobile is paying a price for the strategy as the company said in March it will bear costs for the 4G network that were previously borne by its state-owned parent, boosting the listed unit’s capital spending 49 percent to 190.2 billion yuan ($31 billion) this year.
As a result, China Mobile this year may post its first annual profit drop in 14 years. Full-year net income is projected to fall 1.8 percent to 127 billion yuan, the average of 23 analysts’ estimates compiled by Bloomberg.
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