Biggest Drop in Profit Since 1999 for China Mobile

The company posted its biggest drop in profits in 14 years on March 20. (The Tenth Dragon/Flickr)
The company posted its biggest drop in profits in 14 years on March 20. (The Tenth Dragon/Flickr)

China Mobile Ltd. (941) has an over 70 percent monopoly on China’s mobile communications market, making it the largest mobile phone company in the world with over 775 million subscribers. The company posted its biggest drop in profits in 14 years on March 20.

CEO Li Yue says the drop in profit is due to the increased expenditures necessary to move into the 3G and 4G market. In a Bloomberg report, Yue explained he expects to see “a rapid shift to fourth-generation networks and introduction of popular devices like Apple Inc.’s iPhone to stem declining market share and boost data sales.”

Bloomberg reported: “Net income fell 16 percent to 30.2 billion yuan ($4.9 billion) in the fourth quarter, according to figures derived from full-year results released by the Beijing-based company.”

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CEO Li Yue says the drop in profit is due to the increased expenditures necessary to move into the 3G and 4G market. (Adrian/HK EET)

Too slow to join 3G market

3G and 4G stand for third and fourth generation telecommunication technology, including wireless voice telephoning, mobile Internet access, video calls, and mobile TV.

Analysts point out that the phone giant was too slow to embrace the new wave of technology like the iPhone, getting stalled in negotiations with Apple for around 6 years. They only started selling iPhones at their stores in January this year. The two top, albeit much smaller, competitors offered smart phones much sooner than China Mobile, allowing them to lure customers, according to Bloomberg.

The competition announced increased profits in the fourth quarter. China Unicom (Hong Kong) Ltd. (762) net income rose 24 percent to 2.03 billion yuan, while China Telecom Corp. (728) rose 18 percent to 2.8 billion yuan.

Still, the partly state-owned company (China Mobile is listed on the NYSE and Hong Kong Stock Exchange) controls the market, bringing in 30 billion yuan, while its competitors took under 5 billion yuan between them.

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Third generation mobile phones (TD-SCDMA) for China Mobile (Yoshi Canopus/Wikipedia)

Not state-owned?

China Mobile is coming under increasing scrutiny from Chinese leader Xi Jinping’s anti-corruption campaign. The telecommunication industry is supposed to be state-run, but in actuality is owned and controlled by former leader Jiang Zemin and his gang of elites. Xi wants it all back.

“President Xi and No.2 top leader Premier Li Keqiang’s reform has run into resistance from special interest groups, which are represented by Jiang’s faction. Jiang’s faction controls petroleum, communications, grain storage, and finance,” according to a previous CHINA GAZE report.

“Many important industries have long been monopolized and carved up by special interested groups and princelings. For example, Jiang’s family controls the telecom industry. Jiang’s son established and invested in China Netcom and other companies. He has thus become the King of China’s telecommunications,” according to the CHINA GAZE report.

In March 2013, Premier Li openly pointed out that among other supposedly state-owned industries and businesses, China Mobile was actually a family business, rather than a state-owned business as the people were led to believe.

China Mobile’s executive director and vice president, Lu Xiangdong, was sentenced to life imprisonment on corruption charges last year, as reported on China’s Forbidden News program on NTD Television. Who was Lu’s boss? None other than Jiang Zemin’s princeling son, Jiang Mianheng, and according to NTDTV he is under internal investigation for his involvement in the corruption.

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