China Mobile: Subscribers Move Past the Half-Billion Mark

Posted Mar 18th 2010 3:00PM by Tom Taulli
Filed under: China Mobile Limited (CHL)

With 522 million subscribers, China Mobile (CHL) is a colossus. According to the latest quarterly report, the company saw a 14.2% increase in its customer base, which used up 2.9 trillion minutes of voice usage.

The bottom-line was somewhat tepid as earnings increased 3.3% to $16.87 billion. Then again, China Mobile has had to make substantial capital investments to add new services. At the same time, the company is also feeling the competitive pressures from other major operators like China Telecom (CHA) and China Unicom (CHU).

In fact, it looks like China Mobile will need to increase its spending on handset subsidies, which will mean further pressure on margins. Another issue is that half of the company's users are from rural areas. The upshot is that there is less spending power.

To help find new revenues, China Mobile is working aggressively on its 3G services. These include things like wireless television and perhaps even the iPhone. The goal is to bring on more than ten million 3G subscribers in 2010. There are currently 3.9 million.

Also, China Mobile is looking to expand in foreign markets, which likely means acquisitions. With a market cap of nearly $200 billion and huge amounts of free cash flows, the company should have little trouble pulling off major transactions.

So far in today's trading, the shares of China Mobile are up $0.80 to $49.29.

Tom Taulli advises on business tax preparation and is also the author of a variety of books, including The Complete M&A Handbook. His website is at Taulli.com.

Tags: cha, chl, chu, inthenews, Mobile