China Mobile outlines network strategy in 2014 and Capex

China Mobile chairman Xi Guohua today outlined its network strategy and Capex for 2014.

It will increase capital spending (Capex) by 22 percent to 225.2 billion yuan ($36.34 billion) from 184.9 billion yuan in 2013. One-third of this, or 75 billion yuan, will go to expanding 4G service it launched in December.

44 percent of its 2014 Capex will be earmarked for network, 28 percent for transmission, 5 percent for support services, etc. In 2013, 40 percent of Capex was dedicated for network.

To build up the network needed to create that shift, capital spending will peak in 2014 and 2015 before declining in 2016, said Chief Financial Officer Xue Taohai.

In 2013, its Capex rose marginally.

In 2014, China Mobile will focus on achieving better network performance by improving top-level design, promoting process optimization and implementing a project management model, to form the momentum needed for strategic transformation.

China Mobile says it will lower 4G user threshold by achieving global compatibility, economy of scale production and lower cost of devices.

“We will build new business access in the mobile Internet era through a unified communications service with the features of New Call, New Messaging, New Contacts,” China Mobile chairman said.

China Mobile plans to sell 100 million 4G devices and targets 50 million 4G users by the end of the year, following the January launch of Apple iPhone on its network.

Most of the 1.34 million 4G users are using an Apple iPhone.

China Mobile faces challenges

China Mobile chairman said it faced a number of challenges, including the impact of Over The Top (OTT) products on its communications business. This is in addition to competition from its traditional communications rivals. The Chinese telecom company faced pressure from messaging services like the WeChat mobile app from Tencent Holdings.

China Mobile profit decreased 5.9 percent to RMB 121.7 billion. EBITDA decreased 5.2 percent to RMB 240.4 billion, and EBITDA margin was 38.2 percent.

China Mobile Capital spending for 2014

China Mobile revenue performance

China Mobile operating revenue rose 8.3 percent to RMB 630.2 billion in 2013.

Revenue from telecom services that grew 5.4 percent was RMB 590.8 billion.

China Mobile said its mobile data revenue increased 24.4 percent to RMB 206.9 billion.

Data business contributes 35 percent revenue to telecommunications services, China Mobile said.

Revenue from wireless data traffic rose 58.6 percent to RMB 108.2 billion.

China Mobile data revenue 2013

China Mobile network focus areas in 2013

In 2013, China Mobile modestly increased its investment in infrastructure resources to provide support growth in data traffic and other business expansion purposes.

The company optimized its revenue structure by pooling resources to promote three major drivers of its operations: existing customers and business, data traffic and corporate customer services.

Its customer base is reaching 767 million, while it had a net growth of 104 million 3G customers. Sales of TD-SCDMA mobile phones significantly increased to 150 million, effectively boosting the growth of 3G customers.

China Mobile is aiming to become the world’s largest 4G network with 500,000 base stations that will deliver continuous coverage in all cities, urban areas of counties and key villages by the end of 2014. It will also launch VoLTE by the end of this year.

The telecoms invested in network construction and optimization, to accelerate the transition from voice to data business. It further explored the capacity of 2G (GSM) network while preserving its advantages in both network coverage and voice quality.

China Mobile significantly enhanced its 3G (TD-SCDMA) network carrying capacity and ensured continuous outdoor coverage in cities and central areas of counties and effective coverage in village hotspots. It also invested in WLAN.

Baburajan K