P&L

China Mobile’s annual profits just fell for the first time in 14 years

March 20, 2014
March 20, 2014

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The numbers: The world’s largest mobile phone carrier by subscribers posted its first drop in annual net profit in more than a decade. Net income for 2013 fell to a worse-than-expected 121.8 billion yuan ($19.5 billion), 5.9% lower than the year before, in large part because of a poor fourth quarter, with posted a 16% year-over-year decline. China Mobile’s shares are down 16% this year, almost twice the 8.7% decline in the Hang Seng index.

The takeaway: The company can blame a good chunk of the decline on the costs of developing a new high speed 4G network  and subsidies for selling Apple’s iPhone. China Mobile has been struggling to compete with rivals China Unicom and China Telecom, whose better connectivity has helped them sign up new users at a faster rate.

What’s interesting: Without naming Tencent—whose free messaging app WeChat has been cutting into mobile carriers’ voice and text sales—China Mobile chairman Xi Guohua admitted that the company faces a significant problem with the rise of internet companies. “We face challenges brought about by an accelerated substitution effect in the traditional communications business by Internet services,” he said. “We will push forward with the transition of business development from voice to data.”

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