China Mobile posted a 10.2% decline in its net profit last year, hit by the government’s new VAT regime and a fiercely competitive mobile market.
The world’s biggest mobile operator generated a bottom line of 109.28 billion yuan (€16.57 billion) in 2014, while EBITDA slipped by 2.1% to CNY235.26 billion.
The telco’s operating revenue grew by 1.8% compared with 2013 to CNY641.45 billion, but revenue from telecommunications services fell 1.5% to CNY581.82 billion.
"In 2014, the transformation from business tax to value-added tax and the adjustments of interconnection settlement standards had significant impact on the group’s financial results," China Mobile said in a statement.
The government introduced a pilot scheme to impose VAT on telecoms services in mid-2014, leaving China’s telcos paying higher rates than under the previous business tax scheme. The move had an adverse effect on all three of the country’s operators.
Much has also been made of China Mobile’s 4G network spending, which totalled CNY80.6 billion (€12.24 billion) last year.
By the end of last year the operator had rolled out as many as 720,000 4G base stations covering a population of 1 bill ion. Its 4G customer base topped 90 million at year-end and by the end of February had grown by a further 33 million to 123.38 million.
China Mobile has budgeted for lower capex in 2015, including reducing its 4G spending to CNY72.2 billion.
Overall its capital spending will come in at CNY199.7 billion this year, down from CNY213.5 billion last year.
Competition, from both Internet players and rival operators, also affected China Mobile’s 2014 numbers. And the situation looks set to continue in the current year.
"The competition among traditional operators focusing on existing customers and business and data traffic will be further intensified, with a more diverse range of competitors in a more complex competitive landscape," China Mobile warned.
