By Janet Ong (China Daily)
Updated: 2007-08-17 07:14

China Mobile Ltd's profit surged 29 percent in the second quarter as the company added a record number of users, driven by gains in rural areas, where lower-income residents were attracted by reduced charges.

Net income of the world's largest mobile phone operator by subscribers rose to 20.3 billion yuan ($20.7 billion) from 15.8 billion yuan a year earlier, according to calculations based on the first-half earnings reported by the Beijing-based company yesterday.

The company's shares fell 4.9 percent to HK$80.85, or 3.92 percent, in Hong Kong.

China Mobile, whose 332.4 million users outnumber the US population, has shifted focus from cities to smaller towns and villages, where there is less competition. Chief executive officer Wang Jianzhou waived some charges to attract rural residents, who make up three-quarters of China's 1.3 billion population.

"China Mobile has executed the rural strategy very well, and more than half of the company's new subscribers are from the rural areas," said Desmond Tjiang, who manages $1.3 billion in Asian equities at Fortis Investment Management in Hong Kong, including China Mobile shares. "It's the right move."

Sales are estimated to have risen by 23.5 percent to 88.9 billion yuan. Rainie Lei, a spokeswoman at China Mobile, declined to comment on the second-quarter numbers.

The company's stock has risen 53 percent in the past year, compared with an 18 percent gain in the benchmark Hang Seng Index. China Mobile is the world's 10th largest company by market value.