Mobile revolution for China Telecom

PUBLISHED : Thursday, 31 May, 2012, 12:00am
UPDATED : Thursday, 31 May, 2012, 12:00am


China Telecom, the world's largest fixed-line network operator, expects its mobile data revenue to outstrip income from voice traffic this year as more subscribers adopt Apple's iPhone and other 3G smartphones.

'We are on track to meet our [previously announced] target net addition this year of 36 million mobile subscribers,' chairman and chief executive Wang Xiaochu said yesterday after the company's annual shareholders meeting in Hong Kong.

Wang added that China Telecom, which runs the smallest of the mainland's three nationwide mobile networks, was also gearing up for future high-speed 4G services based on the wireless technology called long-term evolution (LTE).

'We are closely monitoring the evolution of 4G technology,' he said. 'We have two research institutes [on the mainland] that have started LTE network trials this year.'

He did not identify which 4G standard the carrier was testing. Advanced 4G networks have theoretical internet download speeds of up to 100 megabits per second. The fastest existing 3G networks run at 42Mbps.

Market leader China Mobile, with 672.48 million total subscribers as of last month, has been conducting extensive domestic 4G network trials based on time-division duplex LTE, which is the 4G standard backed by the mainland. The other industry standard for 4G networks is called frequency-division duplex LTE. Mainland regulators have not set a timetable for issuing 4G licences.

At the end of last month, China Telecom had 138.51 million total mobile subscribers, including 45.56 million 3G users, on its network. It also had 168.28 million local access lines in service and 81.45 million fixed-line broadband subscribers. Macquarie Securities analyst Lisa Soh said China Telecom has recorded higher growth in mobile data services since last year. 'In the second half of last year, its mobile data business grew 62 per cent year on year compared with 39 per cent for voice,' Soh said.

But China Telecom is heavily subsidising sales of the iPhone 4S, which it introduced to its network on March 9. It posted a 6.5 per cent drop in first-quarter net profit to 4.27 billion yuan (HK$5.8 billion), from a restated 4.57 billion yuan a year earlier, due to higher handset subsidies, marketing and other support expenses.

Wang said the iPhone 'will help the company grow and have a positive impact in the long term', but did not elaborate. He described the iPhone as 'important', but said it was among more than 1,000 handset models offered. The carrier's top sellers are the 1,000-yuan 3G smartphones from mainland brands.

China Telecom also expects to complete its acquisition of the mobile network it is leasing from parent China Telecommunications Corporation by the end of this year.

Wang said this deal would 'bring positive value to the company' from next year. Macquarie estimates that transaction to amount to about 104 billion yuan. China Telecom spent 19 billion yuan last year on leasing that mobile network, while network depreciation at the parent firm was only 12.6 billion yuan.


The number of mobile subscribers to China Telecom at the end of last month

-This includes 45.56 million 3G users