China Mobile, China Telecom profits slide as tax and demand bite

By Daniel Okafor

China Mobile and China Telecom posted third-quarter net income declines of 12.5% and 15.4%, respectively, as weak consumer spending and a value-added tax increase outweighed growth in cloud, AI and enterprise services.

On reported revenue, China Mobile was almost twice the size of China Telecom in the quarter: CNY242 billion ($36.2 billion) against CNY121.9 billion ($18.3 billion). China Mobile's net income fell to CNY27.5 billion ($4.1 billion), while China Telecom's fell to CNY6.6 billion ($988 million). China Telecom's revenue contracted 2.9%; China Mobile's fell 3.4%. Both operators are state-owned, and the report describes them as China's two biggest.

How far did earnings fall?

China Mobile's nine-month net income for the period to September totaled CNY106.2 billion ($15.9 billion), down 7.9%, while revenue slipped 1.3% to CNY780.3 billion ($116.9 billion). Revenue for the nine months declined less severely than its 3.4% third-quarter contraction. The reported performance therefore remained weak across both the quarter and the year-to-date period.

Why did new services not protect core results?

The results point to two simultaneous pressures: subdued consumer spending in a weak economy and a value-added tax increase imposed at the beginning of the year. Neither state-owned operator offered an explanation for its decline. The report said their first- and second-quarter results were similarly tepid.

No tax rate or phase-in schedule was disclosed, limiting the available policy analysis. China Mobile's revenue from non-core services grew 9.9%, even as its main business lines contracted 5.1%. Third-quarter EBITDA fell 6.9%.

The report identified cloud, AI and enterprise services as growth areas, but they did not offset the consumer shortfall. China Mobile said it would continue its “transformation from a communications operator into a technology services enterprise.”

What does subscriber scale reveal?

China Mobile reported 1.01 billion mobile subscribers, including 702 million 5G users. The 5G count represented about 69.5% of the base, equivalent to seven in ten subscribers.

With 702 million 5G users inside a 1.01 billion mobile base, China Mobile still recorded a 5.1% contraction in its main business lines during the third quarter. The result separates network adoption from revenue growth. Subscriber scale did not protect the core business.

The figures provided did not disclose 5G revenue, average revenue per user or churn. Monetization therefore remained unclear despite the operator's large 5G footprint.

What does China Tower show about network demand?

The state-owned infrastructure operator reported first-three-quarter EBITDA of CNY44.8 billion ($6.7 billion), down 12%, as weaker demand in its core telco unit helped drive a 3.1% group revenue decline. That core unit accounts for four-fifths of the business.

Tower sales to telcos fell 8% to CNY52.1 billion. Average tenancy eased from 1.79 tenants per tower in December to 1.77, a decline of 0.02 tenant per tower, or about 1.1%. The direction points to less intensive operator use of shared infrastructure.

Its smaller businesses still expanded:

• DAS revenue increased by 10% during the period.
• Smart-tower revenue increased by 11% over the same period.
• Energy sales increased by 13% in the first three quarters.

The 10% to 13% gains in smaller segments did not reverse the core telco weakness or the group's 3.1% revenue decline.

How did Hong Kong investors react?

During the trading week covered by the results, all three stocks fell in Hong Kong: China Mobile lost 5%, China Telecom 8.8% and China Tower 5.5%. China Telecom recorded the largest share-price loss, 3.8 percentage points below China Mobile's decline.

The market moves followed a reporting week dominated by weaker profit, subdued consumer demand and reduced infrastructure intensity. The report did not attribute the share declines to any separate corporate announcement.

What does the AI-RAN item establish?

A separate featured item reported T-Mobile's first AI-RAN call with Nokia and Nvidia and cited performance gains from Ericsson's AI beamforming technology. The source provided no throughput, latency, base-station, subscriber or rollout figures for either result. It also omitted the standards version and radio configuration.

That makes the item a technical milestone rather than evidence of commercial scale. Operators should treat the Ericsson performance gain as an unquantified technical claim. They should not read the call as a deployment schedule or purchasing commitment.

What should operators watch next?

At the next quarterly reporting cycle, the key test will be whether cloud, AI and enterprise growth can offset weaker consumer demand and the higher value-added tax. China Tower's next disclosures on tenancy, tower sales and smaller segments will show whether operator demand is stabilizing.

No new spectrum, rollout or investment timetable appeared in the report. Without one, the next quarterly updates are the nearest checkpoints for whether enterprise growth can offset core service weakness and operators resume heavier use of shared infrastructure.