Telco sees weakest profit gain in 9 months

China Mobile Ltd, the world's largest phone company by subscribers, saw its weakest profit growth in three quarters as higher costs cut gains from more users of high-speed network services.

Net income rose to 27.9 billion yuan (US$4.5 billion) in the three months through March, compared with 27.8 billion yuan a year earlier, the Beijing-based telco said in a statement to the Hong Kong stock exchange yesterday. Profit was expected to be 28 billion yuan, based on the median of five analysts' estimates compiled by Bloomberg News. Sales rose 5.7 percent to 134.7 billion yuan in the quarter.

Chief Executive Li Yue wants to maintain China Mobile's lead in smartphone users over China Unicom and China Telecom by subsidizing handsets for 3G data users and adding 4G services.

China Mobile said last month that it will bear costs for the TD-LTE, or 4G, network previously borne by its state-owned parent, boosting the listed unit's capital spending 49 percent to 190.2 billion yuan this year.

"The results were a bit lower than our expectations," Ricky Lai, a Hong Kong-based analyst with Guotai Junan International Holdings Ltd, said by e-mail. "The heavy handset subsidies strategy in 2013, with the total estimated at 27 billion yuan, will worsen its profit margins."

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