China Mobile, the main cellular carrier in the world's biggest mobile market, has unveiled a big surge in profits.

The company reported net profit of 28bn yuan (�2.4bn; $3.4bn) for 2001, up 55% on the previous year, and ahead of market forecasts.

The increase was down to a boom in both revenues and subscriber numbers, which now near 73 million, making China Mobile the world's second-biggest provider after Vodafone.

Strong growth in customer numbers has, however, been partly offset by falling revenues per customer, as China Mobile slashes prices in order to remain competitive.

The firm's average revenue per user plunged to 145 yuan per month from 221 yuan in 2000 and 299 in 1999, as most new subscribers signed up for cheap, pre-paid packages.

Slowing growth

China Mobile, which is partly state-owned, faces a challenge from lone rival China Unicom.

Unicom has regulatory permission to undercut China Mobile by up to 10%, which has helped drive down overall calling charges in China.

As a result, both firms predict steadily falling average revenues per customer in the coming years, relying instead on strong flows of new clients to underpin growth.

Some analysts have worried that, since most wealthy Chinese now have mobile phones, further growth can only be achieved by driving tariffs down to unprofitable levels.

China Mobile now has a share of just over 72% of the Chinese market, which last year surpassed the United States to become the world's largest market for mobile telecoms.

Reorganisation

Aware of the diminishing prospects for maintaining growth levels, China Mobile is planning to consolidate its operations.

It reiterated plans to complete the acquisition of eight provincial networks from its parent firm within the first half of this year.

The move has been predicted to cost $12bn (�8.4bn).

In the meantime, the firm is saving cash by cutting capital expenditure to $4.5bn this year and $4.1bn in 2003, from previous plans to spend $5.4bn in each year.