At a time when the Chinese telecom companies are prepping to offer fourth generation network services, the worsening trends of ARPU did raise an alarm. Industry experts are likely to provide significant insights into the way ahead for the Chinese telecommunication sector. Reports reveal, the fourth quarter was very critical for the telecom industry giants in China. ARPU at China Mobile recorded higher decline than the figures recorded by China Telecom.
Analysts at JP Morgan however, stayed unrevoked at a Neutral rating on China Mobile. The price target for the telecom giant was set at HKI$102, while China Telecom reiterated the price target of KS$5.40.
Reports suggest, China Mobile at the end of fourth quarter of 2014 witnessed a 16% year-on-year decline in ARPU, while the decline recorded by China Telecom stood at 4% during the same period.
According to the report published by JP Morgan on Friday, besides negative impacts of VAT, the worsening trend witnessed by China Mobile can be attributed to the increased tariff rebate that was affected amidst the aggressive reduction on handset subsidy. This along with extra data allowance and reduced prices aimed to encourage faster 4G adoption and significantly accelerated data usage growth, are the reasons responsible for the slump registered by China Mobile.
Future prospects are not very pleasant for China Mobile either, since the company might fail to respond adequately to market expectation for revenue generation. Weaker ARPU trend observed by the company is blamed for the situation, which will continue to mount pressure on the company and will result in double digit growth in terms of depreciation.
However, China Telecom’s managers are pretty confident about the future of their company. The Chinese telecom giant is expected to register positive growth in 2015 and has also set the target for itself to have onboard 15 million new subscribers by the end of this year.