China Mobile Moves Towards 3G

August 20, 2004 - source: BWCS

The world's biggest mobile company by subscriber base, China Mobile, is set to bet heavily on 3G technology. According to a recent report by investment banker Merrill Lynch and confirmed this morning by China Mobile, the operator intends to plough Yuan 60 billion (US$7.25 billion) into next generation mobile phone systems over the next two years.

The US financial analysts believe that China Mobile is targeting a 3G customer base of 36 million by the end of 20o6. By the end of June 2004 the Chinese giant had some 158.64 million 2G subscribers in mainland China. Merrill Lynch does not believe that the extra 3G spending will increase the operator's budgeted Capex expenditure for 2005, which is set at US$4.3 billion.

The Chinese company's chairman, Wang Xiaochu, was quoted in the press earlier this week as saying his company would restrict itself to rolling out 3G services to the major cities in China. Xiaochu was speaking at the announcement of China Mobile's first half results on Wednesday of this week. The company revealed it had increased its net profit figure by 7.8% to Yuan 18.83 billion.

It is not yet clear how quickly the company will be able to roll out its 3G network, nor what obligations will be placed on it by the Chinese regulator. The increased spending is seen as easily within its reach as the company has zero debt and has managed to pay out a healthy 21% dividend to its shareholders. It also holds some Yuan 6 billion in cash.

Its smaller rival China Unicom added 1.724 million users in July, taking its total subscriber base to 104.24 million customers.