Partners vie for a bigger bite of Apple
Apple's shadow continues to loom large over the financial results announcements this week of China Unicom and China Telecom, the technology giant's carrier-partners for the iPhone on the mainland.
China Telecom started offering the iPhone 4S on March 9 to signal an increased effort to expand its 3G subscriber base, which is smaller than those of domestic market leader China Mobile and No 2 carrier China Unicom.
Macquarie Securities analyst Lisa Soh said China Telecom's partnership with Apple would also shine a spotlight on its impact on Unicom, which has been the exclusive mainland 3G carrier for the iPhone since October 2009.
China Mobile chairman Wang Jianzhou said last week that the company, which had a combined 2G and 3G subscriber base of 649.6 million at the end of last year, was still in negotiations with Apple to become its next mainland partner for the iPhone.
'The focus for all operators will be their 2012 guidance,' Soh said. That included the carriers' respective capital expenditure, subscribers and subsidies.
China Mobile last week reported a 5.2 per cent increase in net profit last year to 125.9 billion yuan (HK$153.9 billion) from 119.6 billion yuan in 2010. Revenue was up 8.8 per cent to 528 billion yuan from 485 billion yuan the previous year.
Its capital expenditure is forecast to rise 2.6 per cent to 131.9 billion yuan this year from 128.5 billion yuan last year. Handset subsidies are projected to rise 17.6 per cent to 20 billion yuan this year to support the addition of about 30 million new subscribers on its 3G network, which is based on the TD-SCDMA (time-division synchronous code division multiple access) standard. Although its 3G network is not supported by the current iPhone model, China Mobile is estimated to be adding one million iPhone users a month on its 2G network based on the mature GSM (global system for mobile communications) standard.
'China Telecom has said it is targeting 80 million 3G handsets on its mobile network this year,' said Soh. 'This implies significant upside from 34 million last year. She added, however, that the carrier has said its earnings will be under pressure from the iPhone 4S launch.
Apple designed the iPhone 4S to support 3G networks based on the so-called CDMA2000 1x EV-DO standard and more mature wideband CDMA standard in a single device. China Telecom runs a CDMA2000-standard 3G network, while China Unicom operates one based on the WCDMA standard.
'Handset subsidies and marketing for China Telecom will almost certainly increase, reversing a three-year decline,' Soh said. 'We believe earnings will decline 10 per cent in 2012.'
The carrier, which will report its 2011 financial results tomorrow, previously said its capital expenditure would remain flat this year.
Macquarie estimates that China Telecom will report an 11.7 per cent year-on-year increase in 2011 revenue, to 245 billion yuan.