China Mobile Ltd (ADR) (NYSE:CHL) is a popular name in the telecommunication business where it is considered to be the largest wireless provider across the globe. The company's profit declined by 10.2 percent in Q4, the reason behind this downfall is the massive investment the company made to bolster its 4G LTE service within the region.
A filing was observed at the Hong Kong stock exchange today, where the chairman of China Mobile Xi Guoha, they have actually come up with 720,000 base stations in order to establish their 4G network, "The world's largest quality 4G network covering a population of more than one billion people".
This has caused immense discomfort for all those who have invested in China Mobile as their stock price has dropped to HK$99.90 when it was traded this afternoon. Moreover, the profits for the Q4 were expected to be 121.7 billion yuan a year ago. However, they are now expected to be 109.3 billion yuan.
On the other hand the revenues of the company have increased by 1.8% where it was initially 630.2 billion yuan a year ago and now has reached to 641.4 billion yuan.
Xi is not worried about the decline in profit whatsoever. He believes that: "The transcending 4G developments established our leading position in the market and laid a solid foundation for the sustainable and healthy development of the company."
The company believes that the potential of the 4G LTE market is exuberant. China Mobile has received a positive feedback from its consumers in terms of its 4G services and has also succeeded in adding almost 19 million subscribers to its service magnifying its 4G consumer base to 90 million.
Despite the company's profits have surged due to the massive investments it made but eliminating this factor the company shows a significant increase in revenues for the first time in its history. This has apparently been the most stable fourth quarter for the company. China Mobile at this stage does not bother about its revenues but it only seeks to attain a stable flow of subscriptions. Once it achieves its target. It can readily generate revenues.
The company previously lost a good chunk of its users to China Telecom and Unicom because the Chinese users wanted to get their hands on better smartphones and moreover data packages. However, China Mobile is back in the game where it has acquired ample traction to bolster its 4G network.
Hence in a nutshell, the decline in revenues is not something China Mobile needs to worry about since they have a promising future in store.
Disclosure: The author has no positions in any stocks mentioned, but may initiate a long position in CHL over the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.