China Telecom, Netcom surge on wireless talk

Market bets on mobile licences for fixed-line duo

Shares of the two mainland fixed-line operators listed in Hong Kong were among the top gainers yesterday as investors continued to bet on the possible issuance of mobile licences to the two for further growth, market watchers said.

China Telecom Corp and China Netcom Group Corp shares once gained more than 10 per cent despite both companies losing subscribers to mobile operators last month. China Telecom finished the day with an 8.07 per cent rise to HK$5.89 while Netcom closed 11.11 per cent higher at HK$23.50.

The gains were driven mainly by reports that Beijing would soon issue mobile licences for fixed-line operators which would benefit their sluggish performances.

Highlighting competition from mobile operators offering free incoming call packages, China Telecom yesterday said it lost 880,000 fixed-line subscribers including users of the wireless fixed service Xiaolingtong, last month.

'The decrease in new users is also due to tight control in signing up low-margin subscribers,' China Telecom said in its website yesterday.

The operator has lost 480,000 subscribers since January, taking the total number of fixed-line subscribers to 222 million, down from 223 million at the beginning of the year.

Netcom lost 370,000 fixed-line subscribers last month, bringing the total number of fixed-line subscribers to 114 million, down from 115 million in January.

The weak performance of the fixed-line businesses was partly offset by growth in broadband business. China Telecom added 550,000 new broadband subscribers last month while Netcom added 462,000 in the same period.

Meanwhile, China Mobile yesterday said it added a record 6.6 million new subscribers last month, an increase of 8.2 per cent month on month and 44 per cent year on year. Total customers reached 356 million.

Shares of China Mobile, the world's largest mobile operator, opened low yesterday and hit an intraday low of HK$125 in morning trade.

They climbed to the HK$130 level after the lunch break, recording an intraday trading range of more than 7 per cent.

China Mobile closed up 1.97 per cent at HK$134.40. China Unicom, the smaller rival of China Mobile, rose 3.13 per cent to HK$15.80.

'The strong growth in China Mobile's new subscribers comes mainly from the central and western parts of the country which are mostly rural areas,' said Wong Chi-man, a China Everbright Securities analyst.

Mr Wong said China Mobile had been aggressively expanding in the mobile market of the central and western regions since September as the company had a stronger rural network infrastructure than Unicom.

'Despite the new subscribers being mostly low-spending users, they won't drag down China Mobile's margins as the company has successfully encouraged existing high-spending customers to spend more on non-voice services,' Mr Wong said.

Analyst Wang Jinjin of UBS, in a research report published yesterday by the Swiss investment bank, said: 'We believe that China Mobile will report a stable earnings margin in the fourth quarter of this year.'