China Mobile (Hong Kong) Ltd. (CHL) is expected to report a 13% rise in its 2004 net profit, reflecting subscriber growth in its global system for mobile, or GSM, telecommunications network.

The average estimate of 22 analysts polled by Thomson Financial put full-year net profit of the listed unit of China's largest mobile operator at CNY40.19 billion, up from CNY35.56 billion in 2003.

China Mobile is scheduled to report its 2004 earnings on Friday, the first of the four listed Chinese telecom operators to do so.

Analysts said stable subscriber growth, an increase in the number of provincial networks, and a more benign competitive environment were the key factors that supported China Mobile's profit growth last year.

In 2004, China Mobile added 38.179 million subscribers, bringing total users to 204.292 million. In the second half of 2004, the number of provincial networks owned by China Mobile rose to 31 after the company completed the purchase of 10 networks from its parent China Mobile Communications Corp. for US$3.65 billion.

"China Mobile has managed to grow its subscriber base stably, on average 3 million customers per month, in a competitive environment," said ICEA Securities analyst Bertrand Chui.

Chui noted that China Mobile is able to execute a less segmented market strategy than rival China Unicom Ltd. (CHU), which operates both GSM and CDMA, or code division multiple access, networks.

Analysts generally place less importance on the profit growth of Chinese telcos than companies in other sectors as acquisitions have in the past been a key factor in boosting the numbers. Rather, they look for guidance on the trends for pricing competition, average revenue per user, or ARPU, and future capital expenditure commitments.

Credit Suisse First Boston analysts Edison Lee and Jeffrey Tan believe China Mobile turned in a solid performance in the fourth quarter of last year and are optimistic for the outlook in 2005. They cite a less aggressive pricing environment for the personal handyphone system, or PHS, services offered by fixed-line operators and from China Unicom's CDMA services, which compete against China Mobile's GSM network.

Increased data usage, which traditionally generates higher ARPU, also came into play, they said.

Cash-rich China Mobile's dividend policy will also be a focus of the earnings announcement.

While some analysts believe Chief Executive Wang Jianzhou, who took the helm in November, may push for a higher payout, others believe plans to build a third-generation mobile network could prevent the company from delivering a pleasant surprise on the dividend front.

Against this backdrop, observers expect the government to introduce various restructuring measures to the telecoms industry this year, including the issuance of 3G licenses.

China is the world's largest telecom market by subscribers, with about 340 million mobile users at the end of January and a mobile penetration rate of 25.9%.

Shares of China Mobile, which are listed in Hong Kong, have fallen 7% so far this year, underperforming the Hang Seng Index, which fell 3%.

China Mobile shares closed Monday at HK$24.50.