China Mobile Profits Dip 1.6%China Mobile Profits Dip 1.6%

China Mobile posted its first decline in profits since 1999, as China's largest mobile operator reported a 1.6% dip for the second quarter.

The world's largest cellular operator by number of subscribers posted second-quarter earnings of $4.4 billion off $31.2 billion in sales. The company attracted 15.96 million new subscribers in the quarter to boost its base to 493 million subscribers. China Mobile's subscriber base is larger than the combined total of AT&T, Sprint Nextel, T-Mobile, and Verizon Wireless.

Despite holding nearly 70% of China's subscribers, China Mobile is facing increased competition from rivals China Unicom and China Telecom. The majority of Chinese subscribers use entry-level devices for making calls and sending text messages, but users are increasingly upgrading to sophisticated devices that can surf the mobile Web and play multimedia files. China Unicom is currently in negotiations with Apple to release the iPhone in China, and this could poach away subscribers from China Mobile.

China Mobile began rolling out its 3G network at the beginning of the year, and the company expects to gain about 80 million 3G subscribers by 2011. The company's mobile data network relies on the home-grown TD-SCDMA standard for 3G, while rivals China Unicom and China Telecom will use technologies that are more standard around the world. Companies like Nokia, HTC, Samsung, and others have committed to making devices using the TD-SCDMA standard.

China Mobile will also be using the Android operating system to help it attract new subscribers, as it will be tailoring the Linux-based OS to create its Open Mobile System with carrier-branded apps. Handset makers have lined up to create "OPhones" in order to tap into the carrier's large subscriber base, as HTC, Lenovo, and even Dell will likely build mobile devices powered by OMS.

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