Telecom & Wireless
Even Chinese Cellular Markets Face Problems
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China Mobile (CHL), the world largest cellular service provider, posted strong earnings for last year, but that may be the extent of the good news. Company revenue grew, reaching RMB 412,343 million, up 15.5 % compared with 2007. Earnings per share reached RMB 5.63, up 29.4%.
The most extraordinary figure in the company’s announcement is that the net increase in new subscribers per month was more than 7.3 million, taking total subscriber number to 457 million at the end of 2008. That figure is more than four times the combined subscriber bases of Sprint (S), AT&T (T), and Verizon Wireless (VZ)(VOD) combined.
With a near monopoly on the cellular market in the world most populous nation, China Mobile is a window onto the growth of consumer spending in the country. And, the company’s comments about 2009 were cautious, even though Chinese firms are known for playing their cards close to the vest.
In its earnings release China Mobile commented “Looking into the future, the influence of financial crisis that swept across the globe in 2008 will likely widen and deepen, and its impact on China’s economy will continue. The telecommunications industry will be affected.” Put another way, the firm is saying don’t expect the kind of growth that has been posted over the last decade in the current year. Consumers and businesses are under pressure. Cell phone sales rates are moving down.
China continues to boast that it can reach GDP growth of 8% this year. Many economists have that number under 7%. But, China Mobile has close to 500 million subscribers, and, if it says the year won’t live up to its past track record the sheer breadth of its customer based make it a fine proxy for China’s 2009 prospects.
Douglas A. McIntyre
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