Telecom Equipment News
- Big 4 telecoms enjoy robust earnings
Date: 16-Aug-2007 Sources: (Shenzhen Daily)
CHINA Mobile Ltd. should sustain quarterly earnings growth at a 20 percent-plus pace, but investors will look to the country's long-awaited 3G rollout for clues to the sector's outlook.
Margins will also come under pressure as the world's largest wireless operator and its sole rival China Unicom Ltd. slug it out to sign on poorer customers in smaller cities and the countryside with subscriber growth slowing in the world's largest telecommunications arena.
With the growing preference for mobile phones over fixed-line telephones, China Mobile is expected to post the strongest results of the country's Big Four operators, which include fixed-line players China Telecom Corp. and China Netcom Group Corp.
The timing of China's long-anticipated restructuring and the launch of a homegrown third-generation (3G) wireless standard called TD-SCDMA is crucial in gauging future performance.
'3G is an overhang. China Mobile will definitely dominate the market in the next few years, unless an industry restructuring occurs and changes the competitive landscape,'said Alex Chou, a telecom analyst with research firm International Data Corp.
For now, the country's wireless firms are riding still-robust organic growth in usage, especially in rural areas.
China Mobile is expected to report today that net profit in the second quarter ended June jumped by more than 21 percent to 19.195 billion yuan (US$2.53 billion), according to seven analysts polled by Reuters Estimates.
This compares with 15.84 billion yuan a year earlier.
'Using a mobile phone is now cheaper than fixed-line. This is what is driving China Mobile and Unicom's earnings - I'd expect the total minutes of usage to jump sharply, swallowing any negative impact from caller-party-pays,'said Citigroup analyst Michael Meng.
To spur usage, China Mobile said this year one of its units would allow new subscribers to receive free incoming local calls, potentially trimming average revenue per user in the short term.
Margins are also slipping as the nation's wireless duo market their services to poorer rural users.
The firm is expected to post an 18 percent gain in full-year net profit to 77.9 billion yuan, according to an average of 24 analysts' forecasts on Reuters Estimates. That marks a mild slowdown from a 23 percent rise in 2006.
Smaller Unicom is expected to post a 29 percent rise in second-quarter earnings to 1.82 billion yuan, according to Reuters Estimates, though analysts say topline growth may be lacklustre as the firm sheds market share.
In contrast, most analysts remain wary on the two fixed-line players, which are expected to post less-than-stellar revenue and earnings growth as emerging broadband and non-voice businesses struggle to offset a slowdown in core voice revenue.
Looking ahead, the uncertain industry restructuring could alter the landscape for China Telecom and Netcom, end up breaking up Unicom, and potentially pose a threat to China Mobile.
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