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China Mobile hastens 5G rollout amid virus heat

Company sticking to full-year goals despite impact on services

Delivery worker checks his mobile phone on an electric bike filled with vegetables on a street in Wuhan, where the new coronavirus was first detected late last year.   © Reuters

HONG KONG (Nikkei Markets) -- China Mobile on Thursday signaled plans to expedite the rollout of its fifth-generation telecommunications network, looking past the immediate impact from the new coronavirus outbreak, which has weighed on subscriber growth and the usage of its services.

Yang Jie, chairman of the world's largest mobile services company by subscribers, said on a conference call that the company's new mobile customers fell by 7.25 million in February from a year ago, while the growth in new broadband customers also weakened.

The daily average usage of voice, text messages and data declined, while revenue from international roaming services tumbled by more than 50% from a year ago as fewer subscribers travelled overseas. The virus outbreak has also delayed the pace of rolling out the company's 5G infrastructure.

Still, the company said it intends to maintain a growth in revenue for the full year, while posting "stable" profits, with 5G expected to help slow the decline in the average revenue per user (ARPU) per month.

It also plans to boost this year's capital expenditure by 8.4% and make up for time lost because of the coronavirus pandemic by expediting the rollout of its high-speed telecommunication network in the coming months.

The world's largest mobile services company said on Thursday it will spend 179.8 billion yuan ($25.90 billion) this year, with 100 billion yuan out of that amount earmarked for the rollout of its 5G networks at prefecture-level cities and higher.

To achieve its goal, the company will build at least 250,000 5G base stations, five times the number it constructed last year to launch initial 5G services across 50 mainland cities.

Yang said the company has already floated tenders for 5G base stations, and much of the activities related to that process are being done online.

Only around 14% of last year's capex was earmarked for 5G infrastructure and base stations.

"We can work overtime in the second half of the year and implement various measures to gain back time lost because of the outbreak," Yang said. "We are maintaining our annual 5G targets."

The intent reflects China's emphasis on 5G as a technological paradigm of strategic national importance. Technological dominance has assumed greater significance for Beijing as the country has been engaged in a trade war with the U.S. for around two years.

5G networks are believed to be capable of delivering internet speeds that are up to a 100 times faster than on 4G networks.

China Mobile's smaller state-owned peers China Telecom and China Unicom had announced in August that they will pool resources to share the expensive burden of rolling out a 5G network nationwide.

Yang said China Mobile itself is exploring the possibility of a tie-up for 5G services with China Broadcasting Network, one of the four Chinese companies that had won 5G commercial licenses in June, to co-build and co-share 5G network.

"Overall, we are trying to work together in a mutually beneficial, equal, and complementary way," he said.

The new coronavirus, which was first detected in Wuhan in central China late last year, has spread rapidly across the world, forcing authorities to close national borders while also shutting schools and various other establishments.

Yang said China Mobile intends to slow the decline in ARPU that it saw last year, after Chinese mobile service providers were ordered by Beijing to slash data costs and boost speeds on their networks. China Mobile's ARPU fell to 49.1 yuan in 2019 from 53.1 yuan the year before as a result.

China Mobile had 950 million mobile customers as of Dec. 31, adding 25.2 million customers over the course of the year. It also had 187 million wireline broadband customers, an increase of 30.4 million.

Earlier in the day, the company reported a 9.5% fall in profit to 106.64 billion yuan from 117.78 billion yuan a year ago, the company said in an exchange filing. Operating revenue rose 1.2% on year to 745.92 billion yuan.

It declared a final dividend of HK$1.723 per share, bringing full year dividend to HK$3.250 per share. It plans to maintain a stable dividend per share for the full year of 2020.

The company said it attached "great importance to shareholder returns," and will maintain a stable dividend for 2020, after giving overall consideration to its profitability and cash flow generation.

Shares of China Mobile fell 1.1% in Hong Kong on Thursday after the company's results, while the city's benchmark Hang Seng Index dropped 2.6%.

-- Benny Kung & Dhanya Ann Thoppil

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