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China Mobile’s falling shares blamed on competition

China Mobile, the world’s largest phone carrier, is blaming increased competition in the Chinese mobile market for its disappointing second quarter profits.

For the quarter, it posted a slight drop in net profit to RMB34.40bn ($5.40bn) down from RMB34.42bn ($5.41bn) for the same period in 2011. As a result, shares in the company have fallen more than 5% to HK$86.65 ($11.17) per share.

The failure of China Mobile to supply iPhones due to its incompatible 3G technology has been attributed as one of the key factors in its disappointing financial results. Although it has the world’s largest subscriber base, rivals China Unicom and China Telecom have a larger proportions of their customers with 3G contracts.

For the first six months of the year, China Mobile’s financial results showed and overall year-on-year 1.5% increase in profit to RMB62.2bn ($9.7bn). The operator reported a year-on-year increase of 6.6% in total revenues to RMB266.5bn ($41.8bn).

“We faced a number of severe challenges including the increase in mobile penetration, intensified competition, as well as the impact of new technologies and services that are replacing traditional communications services," says China Mobile chairman Xi Guohua.

Earlier this month, China Mobile joined 18 other Chinese technology companies including rivals China Unicom and China Telecom to form the Speech Industry Alliance of China. The alliance aims to provide a more effective voice recognition system for Chinese languages than Apple’s Siri feature.

David Hing, London