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Written by: Staff

HONG KONG, Mar 16 (Reuters) China Mobile (Hong Kong) Ltd., the world's top cellular carrier by subscribers, trumped forecasts on Thursday with a 30 per cent jump in quarterly earnings as it grabbed market share from rival China Unicom Ltd.

China Mobile made a fourth-quarter net profit of 16.6 billion yuan ($2.1 billion), according to Reuters calculations off previous data. It posted income of 12.8 billion yuan in the same quarter of 2004, based on a marginally restated full-year 2004 earnings figure and previous nine-month data.

The consensus forecast had been for 13.2 billion yuan, according to 26 analysts polled by Reuters Estimates.

''The numbers look pretty good -- better than what the market was expecting,'' said Y.K. Chan, a strategist with Phillip Securities. ''A lot of people were wondering whether China Mobile had passed its high-growth phase ... but organic growth does seem to be working as well.'' Looking forward, investors hope Beijing will issue 3G mobile licences in 2006, jumpstarting carriers' growth while unleashing an estimated $12 billion in initial network equipment spending -- a boon for the likes of Motorola Inc..

China Mobile executives said they were preparing for this development. ''We're upgrading our software and starting to get into new businesses'', such as data and music downloads, Chairman and CEO Wang Jianzhou told reporters. ''But voice revenue is still key.'' China Mobile, which controls about two-thirds of the world's largest telecommunications market, has been achieving high net subscriber additions since mid-2005, while Unicom languished. At the end of January it had 250.72 million subscribers -- double Unicom's 129.1 million.

Analysts said that with most of the country's wealthiest customers signed up, both firms have had to look to less affluent customers for growth -- dampening profits.

But China Mobile's fourth quarter not only outstripped the third quarter's 27 per cent earnings jump, it also put paid to analysts' warnings of flagging income growth.

THE NEW New businesses -- data and content -- grew 59 per cent and accounted for a fifth of revenue in 2005, versus 15.5 per cent in 2004. For all of 2005, China Mobile reported a profit of 53.5 billion yuan, versus a restated 41.7 billion yuan.

Shares in China Mobile closed up 0.1 per cent at HK$37.60 ahead of the results release. They climbed 40 per cent in 2005, surpassing Unicom's anaemic 2.4 per cent gain and the Hang Seng Index's 4.5 per cent rise.

China Mobile declared a final dividend of HK$0.57 a share, taking its full-year dividend to HK$1.02. The payout ratio would rise to 42 per cent in 2006 from 39 per cent last year.

The carrier's stock trades at around 15 times prospective earnings, slightly pricier than Vodafone Group's 12 and NTT Docomo's 13, according to Reuters Estimates.

Some industry watchers expect Beijing to dish out 3G wireless licences by June, allowing players to establish high-speed data networks in time for the 2008 Olympics.

''One thing investors will be looking at is the level of capital expenditure ... especially given that the Chinese government still hasn't got a firm 3G policy yet,'' Chan said.

China Mobile declared capital expenditure of 83.3 billion yuan -- excluding any 3G investment -- for 2006, up sharply from 71.5 billion in 2005. That would slide to 78 billion yuan in 2007 and 76 billion in 2008.

Some analysts said the arrival of 3G could initially hurt telecoms stocks.

''The telecom stocks' performance hinges on when Beijing will launch the 3G licence,'' said Marco Mak, an analyst with Tai Fook Research Ltd. ''We expect that will have a negative impact on the existing telecom stocks as competition will intensify.'' Telecoms officials say China is ready for 3G, which supports cutting-edge applications from streaming video to faster Web surfing, but had not committed to a timetable.

When it does come, telecoms equipment makers such as Siemens, Nokia and Ericsson will vie for a piece of the action.


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