China Mobile Ltd.'s first-half earnings should rise by up to 42 percent on strong customer demand, but future growth could be hurt by a government plan to restructure the country's telecoms market, analysts say.
China Mobile, the world's biggest phone company by subscribers, is due to report earnings on Wednesday.
Citigroup's Michael Meng and Anand Ramachandran are forecasting a 42 percent rise in net profit, while Jimmy Cheong of JP Morgan & Co. expects 36 percent.
But all the analysts said China Mobile's future prospects are clouded by uncertainty about government plans to restructure China's telecoms market and to introduce a homegrown third-generation, or 3G, mobile phone standard.
China Mobile shares traded in in Hong Kong have tumbled 42 percent from their Oct. 29 peak, largely on uncertainty about market and regulatory changes.
Regulators are merging state-owned carriers into three groups centered on China Mobile, China Telecom Ltd. and China Netcom Ltd. They want to boost competition at a time when China Mobile is booming and fixed-line carriers are struggling to attract customers. Each new group would have both mobile and fixed-line services.
"We believe that the forthcoming set of results will again highlight the fundamental strength of China Mobile," Cheong said in a research report. "However, the sector faces a challenging next 12 months due to 3G licensing, higher capex, new industry landscape and potential regulatory changes."
China Mobile's customer numbers and profits have soared amid a boom that saw the Chinese economy expand by more than 10 percent for five straight years. It has more than 400 million of the country's 590 million mobile accounts.
First-half results also should benefit by comparison with the same period in 2007, when earnings were hurt by 5.7 billion yuan in additional depreciation expenses due to accounting policy changes.
Meng and Ramachandran said they were lowering their estimates for China Mobile profits in 2008-11 due to stronger competition and possible increased regulatory intervention.
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