China Mobile (Hong Kong) Ltd (CMHK), the world's largest mobile phone carrier by users, posted interim earnings of 18.83 billion yuan (US$2.27 billion), an increase of 7.8 per cent year-on-year, driven by growing subscribers and usage fees as well as the expansion of new business.

During the six months through June, its total subscribers reached 158.6 million, up 22.9 per cent, while the average revenue per user (ARPU) per month dropped to 96 yuan (US$11.6) from 104 yuan (US$12.53) a year earlier.

Total revenue from new business including its short message service and WAP registered a brisk year-on-year growth of 73.7 per cent and reached 11.1 billion yuan (US$1.3 billion), accounting for 12.9 per cent of the company's total revenue.

CMHK's first-half financial performance was in line with market expectations, but analysts were disappointed as the company kept its dividend payout ratio roughly unchanged at about 22 per cent of net profits.

The company's proposed interim dividend of HK$0.2 per share is much lower than the market's expectation of HK$0.23 per share although it reported a rise of 25 per cent from the same period last year.

"I am disappointed although the company reported robust growth and had good management in ARPU," said CLSA analyst Francis Cheung.

Cheung, who forecasted a dividend of HK$0.23 per share or more, said CMHK should have delivered a better dividend payout, given its strong growth and sufficient cash flow. As of July 1, CMHK had a net cash of 5.98 billion yuan (US$720 million), if included the 10 newly acquired provincial mobile telecom companies.

"The dividend is a bit low and its shares might have sell-off pressure in a near term," said Ben Kwong, associate director of KGI Asia, who expected a generous dividend hike in the second half.

But CMHK's Chairman and Chief Executive Officer Wang Xiaochu said at a media briefing yesterday that the company might not raise its whole year dividend payout despite an increase in interim dividends.

"The dividend payout policy depends on several factors like profit growth and cash flow, but the key is the development of third-generation (3G) businesses," Wang said.

He added the company should retain sufficient capital to support long-term development but refused to predict whether the company will be able to launch 3G within the year.

Meanwhile, Wang said that the company would increase its capital expenditure this year by about 15 per cent to US$6.67 billion, the second time it has raised the plan this year.

"The original capital spending projection was not enough. We need to inject further investment to expand our existing network, given the delayed 3G project," said Wang.

Looking ahead, the chairman said there was still high potential growth in subscribers as the country's overall mobile phone penetration rate was merely 24 per cent. In addition, the company's new business will register higher growth in the second half, he added.

Wang also revealed that the company was seeking to issue China Depositary Receipts using shares held by the company's State-owned parent.

CMHK shares, which were up 0.92 per cent before the results announcement, finished 0.23 per cent lower to HK$21.65 yesterday, while the benchmark Hang Seng Index edged down 27.58 points at 12,228.54.

(China Daily August 19, 2004)