China Mobile quarterly profit beats estimates

China Mobile, the world’s largest phone company by users, posted second-quarter profit that beat analyst estimates as new subscribers to its third-generation network increased data use and boosted sales.

Net income rose 2.5 percent to 35.2 billion yuan ($5.8 billion) from 34.4 billion yuan a year earlier, according to figures derived from first-half results released by the Beijing-based company today. The profit beat the 33.9 billion-yuan average of four analyst estimates compiled by Bloomberg.

Chief Executive Officer Li Yue is luring subscribers to 3G with subsidies on a range of devices, including Huawei Technology’s Ascend P6 that is advertised as the world’s slimmest smartphone. Those costs and the rollout of 4G services are restraining profit growth, with the latest results marking the fifth time in six quarters that net income has gained 3 percent or less.

“The results are weak” even while beating analyst estimates, Bertram Lai, an analyst at CIMB Securities in Hong Kong, said in an e-mail today. The slow pace of growth was “likely driven by handset subsidies.”

“China Mobile’s 3G business is starting to gain traction,” Wang Jinjin, an analyst at UBS AG in Hong Kong, wrote in an Aug. 13 report. Data usage “has taken off driven by more smartphones since late last year.”

The carrier is also moving to add fourth-generation services. After building a trial 4G network in 15 cities in 2012, China Mobile in February said it will expand that to 100 cities this year, with 200,000 base stations that can reach a population of 500 million people. China’s government may issue licenses for 4G commercial service toward the end of this year, the company said in March.

Bloomberg