China Telecom profit rises ahead of spending boost
Mainland firm plans to increase capital expenditure by 20 billion yuan once it receives a new 4G mobile network licence
China Telecom, the operator of the mainland's largest fixed-line network, said net profit climbed 17.4 per cent to 17.5 billion yuan (HK$22.16 billion) as it announced plans to increase capital expenditure by 20 billion yuan in 2014 once the firm receives a new licence to run its fourth generation (4G) mobile network.
The company's annual revenues increased 13.6 per cent to 321.6 billion yuan last year due to the rapid growth of its mobile business. Revenue contributed by the mobile sector grew 28.3 per cent during the year to 151.2 billion yuan, while that of fixed-line services was up 3.1 per cent to 170.4 billion yuan.
The company said capital expenditure this year will be 80.3 billion yuan, slightly higher than the 80 billion yuan in 2013. "If the government issues the FDD-LTE [frequency division duplex long-term evolution] licence [for 4G services], we will increase [our] investment by 20 billion yuan," said Wang Xiaochu, China Telecom's chairman and chief executive.
Beijing awarded 4G mobile licences to the three major mainland telecommunications network operators including China Telecom, allowing them to operate 4G services based on the mainland-developed standard time-division long-term evolution (TD-LTE). But China Unicom and China Telecom prefer FDD-LTE because it is more widely accepted internationally.
"We hope the government will issue the FDD-LTE licence as soon as possible," Wang said. "We can use the time to improve our networks' coverage and quality."
Wang said he was not worried about a price war in order to gain 4G subscribers. "There will be competition but there will be no dramatic fall in price. With 4G services launched, the profitability of carriers will only be better."
Yan Chengyin, an industry analyst at Beijing's Bayes Consulting, said it was still too early to say China had entered the 4G era. "At the moment, the majority of users are still on 2G service," he said. China Telecom had 60,000 4G base stations at the end of last year, most of which were upgraded from existing 3G stations, according to Wang. The company plans to add another 80,000 4G stations this year.
Of the total spending, 42.3 billion yuan will go to improving its mobile network, sharply up from the 29.4 billion yuan spent in 2013, according to the firm. It will spend 39 billion yuan on the construction and improvement of broadband facilities.
The firm last year added 34 million subscribers to its 3G network, which is more lucrative than 2G services. Some 56 per cent of China Telecom's mobile users are on 3G contracts, a proportion higher than the other two operators. The company's shares dipped 1.3 per cent yesterday to close at HK$3.15.