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China Mobile pins hopes on new chief and new services
Published on: 2010-08-20
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China Mobile is banking on a leadership change and value-added services to re-ignite its growth over the long term, even as the potential sale of a $7.2 billion stake in the company held by Vodafone becomes a new short-term threat.

China Mobile, the world’s biggest mobile carrier based on subscribers, said Thursday that its longtime chief executive, Wang Jianzhou, 61, was stepping down and would be succeeded by the company’s vice president, Li Yue, 51, a change that paves the way for younger leadership at the company.

The company has been expanding into what it considers higher-value areas with bigger growth potential than traditional voice services. The initiatives include developing a mobile search technology with the state-run news agency Xinhua and buying Shanghai Pudong Development Bank to move deeper into the electronic payment business.

"China Mobile is probably the best bet for investors right now because it doesn’t have any of the baggage that its competitors have,” said Frank Zhu, an analyst at SinoPac Securities in Shanghai. “Li is also a veteran at the company, having worked his way up, and his appointment is probably a good move as he’s still relatively young,” he added.

The change comes after the state-run parent of China Mobile, China Mobile Communications, named Mr. Li its president in May.

Vodafone is now free to sell its 3.3 percent stake in the company following the recent end of a lock-up period, Mr. Wang said Thursday.

The value of Vodafone’s stake has more than doubled since it purchased the stake in two installments from 2000 and 2002, for a total of $3.25 billion. Based on China Mobile’s latest share price, Vodafone could realize a $3.9 billion profit if it sold its stake.

Revenue from value-added businesses, like music and book downloads, rose more than 13 percent in the first half of the year, helping to lift the company’s profit 7 percent in the second quarter.

Despite China’s position as the world’s biggest mobile market, with nearly 800 million subscribers — China Mobile alone has a subscriber base of more than 500 million users — growth for China Mobile and its competitors has been slowing as revenue from voice calls declines amid increasing cellphone penetration rates.

To maintain growth, China Mobile and its smaller rivals, China Unicom and China Telecom, have been trying to attract users to their 3G mobile services to increase revenue and make up for a combined $21 billion spent on building networks last year.

China Mobile posted net profit of 32.1 billion renminbi, or $4.7 billion, for the quarter from April through June, up from 30.1 billion renminbi a year earlier.

Mr. Wang, who will retain his position as chairman of China Mobile, said the group faced “new challenges amid the already high mobile penetration rate and the intensifying competition.”

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