Tuesday, September 16, 2014

China Mobile Eyes Long-Term Growth, But It Comes With A Cost

This article was first published by Seeking Alpha on September 1, 2014

By Sarfaraz A. Khan. Research Asst. Sumaiya Amin
Summary: China Mobile has recently reported its half-yearly results. The company’s revenues climbed but income dropped on higher costs. China Mobile’s profits could continue to remain under pressure this year. It’s long term outlook, however, is what investors should focus on.

China Mobile (NYSE:CHL), the biggest player in China's enormous telecom market, with the largest subscriber base in the world, could continue to struggle with profits this year. But the company is eyeing a brighter future in the long term.

The recent earnings release has shown a drop in profits, but the company is growing where it matters most, data services.

Earlier this month China Mobile released its half-yearly results in which operating revenues increased by 7.1% in H1-2014 from a year ago to $52.8 billion, driven by a 4.7% increase in revenues from telecommunication services, to $48.5 billion. The improvement was due to a 27.81% increase in data services revenues which offset the 53% drop in voice services revenues. The data services unit was buoyed by 52% higher wireless data traffic revenues, which now represent a little less than a quarter of China Mobile's core telecommunication services.

Clearly, the relatively newer data services business has been driving China Mobile's growth. On the flip side, with a shift toward wireless data traffic, the company's traditional business has come under pressure. During the first half of this year, the voice service revenues dropped by read full article at Seeking Alpha