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China Mobile's Rural Rush

BEIJING -- Having won most of urban China's cell-phone market, powerhouse China Mobile (CHL) is now ardently wooing customers in the countryside, where a majority of the population still lives.

Over half its new subscribers hail from rural markets, the company says.

The rural push, which has helped boost subscriber rolls, is one of the factors that helped China Mobile deliver an unexpectedly strong third quarter.

On Friday, the telecom outfit reported that its quarterly profits were up nearly 25% from last year's levels to about $2 billion on revenues of $9.58 billion. Sales grew 23%.

Market reaction was muted; the ADRs closed up 8 cents, or 0.2%, to $38 Friday and were recently up 23 cents, or 0.6%, to $38.23 Monday.

But even analysts who've gotten accustomed to upbeat news count themselves surprised.

"China Mobile appears to have landed on that sweet spot where it can do nothing wrong. Its rising scale has led to swelling results that surpassed our high expectations," writes Hong Kong-based Merrill Lynch analyst Wendy Liu in a note.

On the user growth front, China Mobile reached a total of 287 million subscribers as of the end of September -- not far below the 300 million population of the entire U.S.

China Mobile already claims a two-thirds share, based on revenues, dominating the smaller China Unicom (CHU - Get Report).

And now it's likely to bolster its standing, as it romances the first generation of rural cell-phone users.
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