China Telecom FY profit dips

10:28, March 23, 2010      

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China Telecom Corp, the country's biggest fixed-line carrier, reported full-year profit fell 34 percent, missing analysts' estimates, as the company increased spending to add mobile-phone users.

Net income less the fees the company used to charge to install fixed lines, and some other items, fell to 13.3 billion yuan ($1.9 billion) from 20.1 billion yuan, China Telecom said on Monday. That compared with the 13.9 billion yuan median estimate of three analysts surveyed by Bloomberg News.

China Telecom added wireless users at a quicker pace in the second half after rolling out high-speed networks nationwide and offering a wider range of handsets to meet rising competition from China Mobile Ltd and China Unicom (Hong Kong) Ltd.

Marketing spending aimed at boosting customer growth means the mobile-phone division may only turn profitable in 2012, according to Mirae Asset Securities Co analyst Daniel Baker.

"The company has to keep up the subscriber addition rate," Baker wrote in a report on Wednesday. Still, the focus on boosting users may lead to a drop in "the quality of new customers," according to the Hong Kong-based analyst.

The carrier's shares closed unchanged at HK$3.56 in Hong Kong trading after the earnings announcement, and have advanced 9.6 percent this year. Shares of China Mobile, the world's biggest phone company by market value, have gained 3.6 percent this year, while China Unicom has declined 10 percent.

Broadband revenue

Sales rose 13 percent to 208.2 billion yuan, as higher mobile phone and broadband Internet revenue helped offset lower income from fixed-line services, China Telecom said.

The Beijing-based company added 16.8 million mobile-phone users in the second half, compared with 11.4 million in the previous six months. The carrier, which entered the cellular market in 2008 by acquiring the smaller of China Unicom's two wireless divisions, added a further 6.1 million customers this year for a total of 62.15 million at the end of February. By comparison, China Mobile added 29.2 million wireless users in the second half of last year.

China Telecom may use 37 percent of its mobile-phone revenue to subsidize the costs of customers' handsets, compared with an earlier guidance of 30 percent, Chairman Wang Xiaochu said in August. This meant it might take one more year for the wireless division to turn profitable, he said.

China Telecom's year-earlier profit excluded an 18.4 billion yuan asset impairment charge the company made in 2008 to write down the value of its Little Smart citywide cordless service, and a 2.84 billion yuan charge from "natural disasters," according to the statement.

Source: China Daily
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