China Telecom results down 7.3pc year on year
Network giant's third-quarter earnings down 7.3pc from last year
China Telecom, the world's biggest fixed-line network operator, reported a fall in net profit of 7.3 per cent for the third quarter from a year earlier, hit by increasing costs and subsidies on mobile phones to attract subscribers.
Net profit dropped to 3.75 billion yuan (HK$4.61 billion) while revenue rose 16 per cent to 72 billion yuan from the year-earlier quarter.
The latest quarter brought profit for the first nine months to 12.6 billion yuan, down 8 per cent from the year-earlier period, while revenue was up 15 per cent to 210 billion yuan.
The company joined China Unicom in March in offering Apple's iPhone on the mainland, in the hope of luring quality users in a market that is already saturated.
"Following the launch of iPhone to expand the high-end market during the period, the group made an appropriate increase in marketing initiatives for the profitable scale development of its mobile services," the company said in a filing to the Hong Kong stock exchange. It said that while it expected to enhance its long-term sustainable growth, "short-term pressure on profitability" would result.
The Beijing-based company has reported successive quarterly profit declines since it began offering iPhones in March.
Macquarie Capital Securities' analyst Lisa Soh said she expected profit margins "to continue to decline in the fourth quarter on new phone launches" because of increasing selling costs and other expenses. She said the iPhone5 was expected to be available on the mainland in December.
Yang Changlong, an industry analyst at Beijing's Bayes Consulting, said Apple's new gadgets usually were available on the mainland three to six months after their official launch in the United States.
Yang said it was hard to forecast when China Telecom would resume profit growth. "The subsidy policy has been consistent and I think the performance in the fourth quarter will continue to be sort of lacklustre."
Moreover, the launch of iPhone5 will have a limited impact in beefing up the carrier's performance, according to Yang.
"In 2009 and 2010 iPhone outshone all the other devices but now Samsung is a strong challenger and many users in big cities are switching to Samsung," he said.
In the third quarter, China Telecom's mobile unit added 8.44 million users, boosting its subscriber base to 152.6 million at the end of September. That compared with its major rival China Mobile's 698.5 million and China Unicom's 229.5 million.
China Telecom shares rose 0.9 per cent to HK$4.57 yesterday in Hong Kong, outpacing the benchmark Hang Seng Index, which dropped 0.2 per cent.