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Despite profit drop, China Mobile customers balloon to 781M

The company needs to find new ways to generate revenue off those customers as its traditional sources are being squeezed by messaging apps.

At least China Mobile is selling the iPhone. Screenshot by Lance Whitney/CNET

China Mobile may be growing in leaps and bounds, but the company announced on Tuesday its lowest quarterly profit in five years, due in large part to declining revenue per user.

China Mobile's revenue hit 154.8 billion yuan ($24.8 billion) during the first quarter of the year (PDF), up 7.8 percent compared with the same period last year. However, the company could only muster a 25.2 billion yuan profit, down 9.4 percent compared with last year.

The world's largest carrier, however, was able to hold onto its crown, growing its customer base from 767 million customers at the end of December 2013 to 781 million at the end of March.

China Mobile is the crown jewel in any smartphone maker's international sales strategy. The company has many more customers than any other carrier in the world and with its recent addition of 4G wireless service to its product lineup, it's possible for device makers to bring their products to the network without making too many design sacrifices.

Still, China Mobile's profit decline might prove concerning for investors. Out of its 781 million customers, just 2.8 million are on its new 4G service. The company has also watched its average revenue per user of 68 yuan per month drop to 62 yuan this year, due in large part to declining voice and data usage.

In a statement accompanying its earnings statement, China Mobile said that it "experienced severe challenges in its operations and development as the impact of mobile Internet on the traditional communications business became more evident."

The chief concern for China Mobile is the increasing popularity of messaging applications replacing key revenue-generators for the company, like SMS. In just the last year, SMS usage has fallen from 164 billion messages per quarter to 153 billion, due to popular messaging apps. Wireless data traffic has also declined, hurting revenue-generation.

China Mobile also acknowledged that it's investing heavily in 4G technology to catch up to competitors in the country that have already built up their 4G networks. Those costs are expected to continue to pile up in the coming months.

CNET has contacted China Mobile for comment on its earnings report. We will update this story when we have more information.