China Telecom

China Telecom loses subscribers in 4G race

The mainland's third-largest mobile player records drop in users as profit climbs 17.9 per cent and revenue jumps 6.9 per cent in quarter

PUBLISHED : Tuesday, 29 April, 2014, 1:15am
UPDATED : Tuesday, 29 April, 2014, 1:15am

China Telecom saw a drop in the number of mobile subscribers in the first quarter as competition intensified after Beijing gave approval for the three major telecommunications operators to launch 4G services in December.

China Telecom, the mainland's largest fixed-line network operator and third-largest mobile services operator by subscribers, said first-quarter net profit rose 17.9 per cent from a year earlier to 5.5 billion yuan (HK$6.8 billion) while revenue grew 6.9 per cent to 83.2 billion yuan.

The company had 183.2 million mobile subscribers in the quarter, a drop of 2.38 million from the preceding quarter. However, the number of 3G subscribers rose 1.03 million to 104 million.

The drop in mobile subscribers was mainly due to increasing market competition driven by the launch of 4G services and strengthened marketing promotion by rivals, China Telecom said in a filing to the Hong Kong stock exchange yesterday.

Ricky Lai, an analyst at Guotai Junan International, said the jump in profit was helped by the expansion of the 3G users' pool.

The average revenue per user was 71 yuan, unchanged from the year-ago period.

The company might continue to lose users in the current quarter because of promotions launched by its rivals, according to Lai.

"China Mobile was the first of the three to start offering 4G services. It increased smartphone subsidies and offered a number of smartphones priced at about 1,000 yuan to attract users," he said.

In the past two years, China Telecom had gained customers from China Mobile with better 3G services, but that competitive edge seems to have been blunted.

In the past, Apple's iPhone could not work on the 3G network of China Mobile but was compatible with China Telecom's. Now, the iPhone can be used on China Mobile's 4G network, which had 767.2 million subscribers at the end of last year.

Beijing allows carriers to operate only on the government-backed 4G standard. China Telecom and China Unicom both prefer a mature standard that is widely adopted worldwide.

The turning point for the industry will come when the country hands out licences for the mature 4G standard, according to Lai. "There is big chance for the licence to be issued in the second half of this year," he said.

China Telecom said it was applying for a licence for the mature 4G standard while expanding the width and depth of network coverage in major cities.

Shares of the company rose 4.56 per cent yesterday to close at HK$3.67, outperforming the Hang Seng Index, which dropped 0.41 per cent.