China Mobile Ltd Slowdown? World's Largest Carrier Faces Lower User Growth

China Mobile Ltd., the world’s largest telecommunications carrier, is reporting lower profits than expected as new subscribers rose at a slower rate, Bloomberg reported Tuesday. The state-owned company said its third-quarter net income, ending in September, was up 13 percent to 28.2 billion yuan ($4.4 billion).

Although the third quarter had the highest quarterly growth seen in several years, it was lower than expected by analysts who predicted revenue at 176 billion instead of 172 billion yuan. The disappointing revenue was due in part to a less than 1 percent rise in new subscribers in September as well as the costs associated with building a high-speed network. New subscribers rose to 822.9 million while 4G customers increased to 247.6 million people.

The third-quarter results come after China’s wireless carriers reorganized and merged approximately $36 billion in assets, Bloomberg reported last week. The merger was part of a government plan to aid state enterprises as mobile carriers face competition from messaging applications. Analysts say the merger could help companies as they expand into China’s rural regions.

“The completion of the long-awaited tower asset injection should help to level the competitive ground for the smaller operators,” said Cynthia Meng, an analyst at Jefferies Group LLC, according to Bloomberg. “However, due to the magnitude of the scale, we believe China Mobile will remain the dominant telecom market leader by far.”

The third-quarter results come at moment of continued economic uncertainty following China’s market turmoil that spread across the globe in late August. China’s economic growth slowed in the third quarter, growing by 6.9 percent, a weak rate not seen since the global financial crisis of 2008, the BBC reported Monday.

Manufacturing data has shown continued contraction as China reorients toward a service-focused economy away from an export-dependent one.

"In order to restructure, the economy will face some downward pressure," said Sheng Laiyun, a spokesman for the country’s statistics agency. "All this indicates the restructuring and upgrading of the Chinese economy are going steadily."