Higher handset costs eat into China Telecom profit
China Telecom Corp, (0728.HK) the smallest of the country’s three carriers, posted a 10 percent drop in quarterly net profit on Wednesday, its biggest decline since the second quarter of 2010 mainly due to higher handset subsidies.
China Telecom, which competes with China Mobile and China Unicom in a country that has over a billion mobile phone subscribers, reported a first-half net profit of 8.814 billion yuan (US$1.4 billion), down from a revised 9.616 billion yuan a year earlier.
The market was expecting China Telecom to report a first half net profit of 8.72 billion yuan, according to four analysts surveyed by Reuters.
That meant that the carrier recorded a net profit of 4.54 billion yuan in the April-June quarter, compared with a consensus forecast of 4.45 billion yuan and down from 5.046 billion yuan a year earlier, according to calculations made by Reuters from the company data.
China Telecom is spending more on subsidies and marketing to try to sell more smartphones, with its move likely to benefit its bottomline in the long-term when it captures high-end subscribers, analysts said.