China Mobile Ltd. (NASDAQ:CHL)’s Revenues Fall

China Mobile Limited (NASDAQ:CHL), the largest wireless carrier in China, posted its earnings for the third quarter of the current fiscal year. The results were very disappointing. The total earnings of the company and the revenue generated were less than they were in the same quarter last year. This was the fifth successive quarter in which the company’s net profit had seen a decline.

There are five reasons due to which the company has shown such a bad performance:

The growth rate of the mobile market of China decreased recently.
The company’s expenses increased ever since the 4G TDD-LTE network was rolled out in the market.
The customer retention costs also increased.
New value-added taxes have been imposed now.
The competition in the market has intensified over the years.

The total revenue generated in the third quarter was $25.8 billion this year. This was 2.1% less than the revenue generated in the same quarter last year. Net earnings totaled about $4.1 billion, which had decreased by 12.4% over the year. The third quarter earnings before amortization, interest, tax and depreciation were worth $9.6 billion. This shows an annual decline rate of about 6.3%.

Up till September, China Mobile Ltd. (NASDAQ:CHL) generated $79.3 billion in revenue which increased 3.9% year over year. The net earnings fell by 9.7% year over year to $13.6 billion. During the same time, the EBITDA was about $29 billion. This reflected a decline of 5% from last year. Last year, the profit margin was 19.8% whereas the profit margin this year was 17.2%. The company has offered Apple Inc. (NASDAQ:AAPL) developed iPhones ever since the beginning of this year.

By the end of the third quarter, the number of total subscribers of the company was 799.13 million. Out of these subscribers, 64.3% or 513.72 million constitute the 2G subscribers, 30.6% or 244.46 million are the 3G subscribers and the rest of the 5.1% or 40.95 million were the 4G subscribers. In the third quarter, the number of 4G subscribers was 11.4 million.

China Mobile Ltd. (NASDAQ:CHL) has the largest number of subscribers in the world. But, the market for wireless communications sees a lot of competition in China. China Unicom Ltd. (NASDAQ:CHU) is expanding its FDD-LTE network and so is China Telecom Corp. Ltd. (NASDAQ:CHA). So, there is little room for China Mobile Ltd. (NASDAQ:CHL) to grow. The market is almost fully saturated now.

Despite the declining revenue and net income, China Mobile Ltd. (NASDAQ:CHL) has a huge number of 2G and 3G subscribers in the world. Even though there is little room for growth, yet, there is chance of improvement in the top and bottom lines if the company upgrades its current 2G subscribers to 3G and the 3G subscribers to 4G. This will help the company come out of its current financial decline. Currently, with the millions of subscribers, Zacks Rank has ranked the company number 1, that is strong buy.