Business
* H1 EBITDA slides 0.9 pct from year earlier
* Average revenue per user down 4.3 percent in first half
* Q2 net profit slightly below forecast, H1 net up on year
* Shares slump 5 pct, underperform rivals
* Still waiting for Apple deal, 4G licences (Adds TV link, no changes to text)
By Lee Chyen Yee
HONG KONG, Aug 16 (Reuters) - China Mobile Ltd,the world's biggest wireless carrier by subscribers, postedfirst-half falls in key measures of revenues and profitability,prompting a 5 percent slide in the company's shares for theirbiggest one-day drop in a year.
China Mobile, the only Chinese carrier that doesn't have adeal with Apple Inc to sell iPhones in the world'sbiggest mobile market, said on Thursday it would ramp upspending on handset subsidies, which it uses to entice moresubscribers to smartphones and data, a bigger revenue driverthan voice services.
China Mobile has signed up close to seven out of every 10 ofChina's one billion mobile phone users. But only a tenth of themuse higher-revenue, third-generation (3G) technology, a muchsmaller proportion than that of its main rivals.
Most of the firm's 683 million subscribers -- more thantwice the population of the United States -- use lower-value 2G,a factor weighing on the company's average revenue per user(ARPU), which fell 4.3 percent in the first half of the year to67 yuan.
The slide in the ARPU and a 0.9 percent drop in first-halfearnings before interest, tax, depreciation and amortisation to123 billion yuan, suggested its core business was feeling theimpact of rising competition.
"This means the telecoms earnings are already declining,which I don't think the market was expecting, so I would saythis is quite negative," said Marvin Lo, an analyst at MizuhoSecurities in Hong Kong.
"The second-quarter results this year are going to trigger adownward revision for China Mobile's earnings going forward."
First-half net profit rose just 1.5 percent from a yearearlier and April-June net profit of 34.4 billion yuan ($5.5billion), was slightly below expectations of 35.2 billion. Thecompany only reported figures for the first half, so thequarterly profit was calculated from the company's data.
To compete with China Unicom and China TelecomCorp Ltd, the company said it would step up spendingin the second half of the year on handset subsidies.
Chief Financial Officer Xue Taohai said it spent 12 billionyuan on handset subsidies in the first half of the year, butthat it would raise full-year subsidies to 26 billion yuan froman initial plan for 21 billion yuan.
China Mobile shares slumped more than 5 percent on the day,while China Unicom fell 0.65 percent and China Telecom rose 0.5percent.
Just over a quarter of China Unicom's subscribers have 3Gcontracts, while at China Telecom it is 35 percent.
"We faced a number of severe challenges including theincrease in mobile penetration, intensified competition, as wellas the impact of new technologies and services that arereplacing traditional communications services," said Chairman XiGuohua in a statement accompanying the results.
Reflecting some of the competitive pressures, rival ChinaUnicom introduced a budget calling scheme earlier this year in afew Chinese locations, such as Zhejiang province. It allows 2Gusers to make calls at a very low costs.
"A price war in the Chinese telecom market is inevitable,"said Chris Hsu, China product manager at Allianz GlobalInvestors Taiwan, which invests in China Mobile's shares.
"Handset subsidies have been pressuring all three carriers'ARPU," Hsu said. "Carrying iPhones usually incur costs forChinese carriers, but the contracts and services bundled withthese iPhones will slowly offset such costs."
China Mobile's home-grown 3G technology called TD-SCDMA is astumbling block in clinching a deal with Apple, which does notsupport the technology in its iPhones. China Mobile's rivals usea different 3G technology supported by iPhones.
However, analysts speculate that chipmaker Qualcomm Inc will roll out a TD-SCDMA chipset later this year. Thatcould pave the way for an Apple-China Mobile deal, although itwould also raise other questions, analysts said.
"In the event Qualcomm introduces TD-SCDMA chipsets, webelieve China Mobile has to weigh the pros and cons of pushingaggressively on handsets with such chipsets embedded," Nomuraanalyst Danny Chu said in a report before the release of thehalf-year results.
"If China Mobile pushes such handsets aggressively among itshigh-end subscriber base in late 2012, the company may face achallenge when promoting TD-LTE handsets in 2013."
TD-LTE is a 4G mobile technology that China Mobile will beusing for its network to try to better compete with otherChinese carriers.
Since the beginning of this year, China Mobile's HongKong-listed shares have risen about 14 percent, outperforming an8.3 percent rise in the Hong Kong Hang Seng Index. ChinaUnicom is down more than 25 percent and China Telecom is off 7.9percent. (Editing by Neil Fullick)
