China Mobile Ltd. (CHL, China Mobile) will invest nearly US $ 7 billion this year to build a fourth-generation (4G) mobile communications network to maintain its advantage in the Chinese communications market.
The above measures announced on Thursday were submitted to mobile phone manufacturers such as Apple Inc. (AAPL), operators such as Softbank Co. (9984.TO) of Japan, Ericsson (ERIC) of Sweden and China Huawei Technologies Co. (Huawei Technologies Co.) and other equipment manufacturers have sent a signal that China Mobile is making great efforts to provide customers with faster data transmission speeds. At the same time, as global operators adopt 4G technology, the 4G international standards supported by China Mobile will also be strengthened. Measured by the number of users, China Mobile is the world's largest mobile communications operator.
HSBC's communications industry analyst Tucker Grinnan said that whether it is for Ericsson, Huawei, Softbank or Apple, China Mobile intends to declare that it believes that the technology it uses is feasible and will take action.
China Mobile ’s planned investment of US $ 7 billion in 4G services is part of its 2013 US $ 30 billion capital expenditure plan. The above capital expenditure budget has increased by nearly 50% compared with 2012, and has greatly exceeded analysts ’expectations. In comparison, AT & T Inc. (T) had capital expenditures of US $ 19.7 billion in 2012.
China Mobile is undoubtedly China ’s largest communications operator, but its profit growth has slowed, in part because the company ’s 3G communications standard has not been widely used outside of China, so it cannot sell Apple ’s iPhone and other best-selling Mobile phones, at the same time, have brought other problems. As Chinese consumers have successively purchased touch-screen smartphones that support 3G networks, they are increasingly looking to China Unicom (Hong Kong) Ltd. (CHU, China Unicom) and China China Telecom Co. (CHA, CHA, China Telecom) purchases communication services.
China Mobile announced on Thursday that last year's net profit increased by 2.7% to RMB 129.3 billion ($ 20.5 billion), an increase of less than 5.2% in 2011. Revenue increased from RMB 528 billion in 2011 to RMB 560.4 billion.
The company's investment plan will provide new support for its adopted 4G communication standard TD-LTE. Although the current popularity of the TD-LTE standard is lower than the FDD-LTE standard used in the United States, China Mobile ’s efforts are likely to attract more smartphone manufacturers, communication operators and equipment suppliers to support this standard.
China Mobile Chairman Xi Guohua said at the annual performance briefing on Thursday that if the Chinese government issues a 4G commercial license by the end of 2013, it will be a reasonable arrangement, otherwise the industry may not be ready. A government official said last week that 4G licenses will be issued in 2013.
China Mobile is in discussions with Apple Inc. on the sale of the iPhone, but the company ’s general manager Li Yue said that the negotiations have not yet made progress. Xi Guohua once met with Apple CEO TIm Cook in Beijing in January to discuss cooperation matters, which raised expectations that China Mobile would start selling iPhones soon.
The company will become an important partner of Apple. The latter is currently facing fierce competition from Samsung Electronics (Samsung Electronics Co., 005930.SE) and other smartphone companies that use the Android operating system of Google (Google Inc.).
China Mobile did not disclose how many subsidies it plans to provide to support the sales of high-end mobile phones, but analysts expect related subsidies to increase, and considering the high capital expenditure budget, it is expected that China Mobile ’s profitability will be under pressure in the next few years.
The company's failure to raise the dividend payout disappointed analysts. As of the end of 2012, China Mobile's cash was RMB 378 billion, higher than RMB 303 billion at the end of 2011; shareholders have also been calling on the company to increase its dividend.
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