China Mobile Adds Record Subscribers for Fourth Month
By Mark Lee
Feb. 21 (Bloomberg) -- China Mobile Ltd., a company with more customers than the U.S. has people, added a record number of subscribers for a fourth consecutive month after expanding in rural areas.
The carrier gained 4.86 million users in January, taking its total to 306.1 million, China Mobile said on its Web site. The Beijing-based company added 4.83 million subscribers in December.
China Mobile, the world's largest wireless phone carrier by users, targeted the 800 million people living in rural areas as competition increased in the cities. An estimated 65 percent of people in the nation still don't own mobile phones, compared with about 32 percent in the U.S., according to industry groups.
``The market penetration in rural areas is about 12 to 15 percent, so demand from these users will continue to grow,'' said Victor Yip, a Hong Kong-based analyst at UOB Kay Hian Ltd. who has a ``buy'' rating on the stock. Yip has a 12-month share price estimate of HK$77.70 on the company's shares.
Accelerating subscriber growth helped China Mobile stock surge 83 percent last year, more than six times the gain in shares of the U.K.'s Vodafone Group Plc, the market leader by revenue. China Mobile's stock rose 2.6 percent to HK$76.75 at the midday break in Hong Kong today, compared with a 0.3 percent gain in the benchmark Hang Seng Index.
Capital Spending
China Mobile, which controls about two-thirds of the country's wireless market, said in August it was increasing capital spending by 17 percent to 83.3 billion yuan ($10.8 billion) in 2006 to expand networks in rural areas. The move enabled the company's subscriber growth to accelerate.
Rising demand from rural areas will enable China Mobile to sign up 62.5 million users this year, or more than 5 million a month, compared with 53.2 million users last year, Merrill Lynch & Co. analyst Wendy Liu wrote in a report on Jan. 23.
``The company has the right strategy, focusing on the rural areas for growth,'' Teresa Chow, who helps manage $500 million at RBC Investment Management Asia in Hong Kong, said before China Mobile released its January user data. Use of wireless services in the biggest Chinese cities ``is already quite high,'' she said.
China Mobile may boost user growth with the introduction of a caller-pays billing system by its unit in Guangdong this month, said UOB Kay Hian's Yip. The unit said on Jan. 29 it will start waiving incoming call charges for some users from February.
Smaller rival China Unicom Ltd. said last week it signed up 1.38 million users in January, the highest monthly additions since May 2005, which may mean the company has stepped up marketing to boost growth, according to DBS Vickers Ltd. analyst Steven Liu.
Fixed Lines
``We need to watch Unicom's handset subsidy and marketing costs to see if they are increasing,'' Liu said on Feb. 16. ``Unlike China Mobile, Unicom's growth is not based on a focus on rural areas, as its networks are less extensive.''
China Mobile and Unicom are benefiting at the expense of traditional fixed-line service providers. Subscriber growth at China Telecom Corp. and China Netcom Group (Hong Kong) Ltd. is slowing as wireless operators cut rates and offer cheaper handsets.
China Telecom said today its user growth slowed last month due to ``intensified market competition from mobile operators.'' The Beijing-based company said on its Web site that it added 250,000 users in January, compared with 640,000 in December. The total number of users increased to 223.3 million as of the end of last month, China Telecom said.
3G Licenses
Fixed-line operators are seeking to enter the faster-growing mobile market by gaining licenses from the government for third- generation wireless services. China Netcom said the licenses may be issued before October, JPMorgan Chase & Co. said in a report on Feb. 14, following a meeting with the company's Chief Executive Officer Zuo Xunsheng.
The high-speed wireless licenses may be issued before the government finishes building test networks based on a domestic 3G technology, known as time division-synchronous code division multiple access, or TD-SCDMA, in October, JP Morgan said, citing Zuo.
Apart from plans to start 3G services, which allow faster downloads of music and video on mobile phones, China Telecom and China Netcom are seeking to sign up more broadband customers to offset declining fixed-line growth.
China Telecom gained 760,000 broadband users in January, bringing its total to 29.1 million. That was the first time the company has provided monthly additions for broadband users.
China Netcom does not provide monthly customer numbers.
About 35 percent of China's population own mobile phones, the Ministry of Information Industry said on Jan. 22. The U.S. had 201.7 million cell-phone subscribers at the end of 2005, according to the International Telecommunications Union.
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