China Mobile under pressure from OTT and increased competition

The world’s largest mobile operator, China Mobile, has reported first half net profit of $9.76bn on operating revenues of $41.86bn. But in a statement the firm said that competition in the Chinese market – from peers as well as internet players – is intensifying. The growth potential in “traditional telecoms services” is shrinking in China, it said.

The firm said that it had amassed more than 683 million subscribers at the end of June 2012, with 67 million of those users on its 3G network.

While the customer base grew by more than 33 million during the quarter, China Mobile said that the mid – high tier customer base only “remained stable”, suggesting that acquisitions are now more likely focused on the lower end of the market.

Data revenue including SMS was up 17.3 per cent year on year, accounting for 28.5 per cent of total revenue. Income from wireless data services grew by 51.6 per cent over the same period last year, hitting $4.59bn. During the period, China Mobile said, 389.2 billion Megabytes of data travelled across its network, while it carried two trillion voice minutes.

But the firm said that performance had been hit by increased competition as well as higher penetration in the Chinese market. It also referenced the OTT threat, citing “the impact of new technologies and services that are replacing traditional communications services.”

In a statement China Mobile stressed the importance of evolution and realignment in the face of growing compeition. “The Company will focus on revitalizing itself through centralizing management, specializing in operations, adopting market-oriented mechanisms, achieving a flat organizational structure and standardizing procedures, all geared towards achieving sustainable growth,” it said.