Earnings focus fixed on China Telecom's 4G plan
China Telecom, operator of the mainland's largest fixed-line network, is expected to outline its 4G mobile network expansion plans when it reports first-half earnings on Wednesday.
The Beijing-based telecommunications services company, which is also the mainland's third-ranked wireless network operator, has managed to bolster 3G mobile user growth since becoming the second domestic carrier partner for Apple's iPhone after China Unicom.
The total number of mobile subscribers on China Telecom's network reached 174.50 million at the end of June, 87.33 million of whom are much-coveted 3G data users.
In a research note, Barclays said China Telecom was "executing well". It forecast the operator would post a net profit of 9.91 billion yuan (HK$12.46 billion) in the first six months of the year, up from 8.814 billion yuan a year earlier.
The consensus average from analysts' estimates compiled by Bloomberg was for a higher net profit of 9.745 billion yuan.
Barclays predicted China Telecom's iPhone sales to total three million units for the whole of this year, beating the operator's two million total last year. It said: "Higher iPhone sales this year should contribute positively to [monthly] average revenue per user growth, as well as total revenue growth."
China Telecom is expected to post first-half revenue of 84.559 billion yuan, rising from 83.893 billion yuan the previous year.
Ricky Lai, a research analyst at Guotai Junan International, said investors would likely focus on what steps China Telecom would take to prepare for the roll-out of high-speed 4G mobile services.
The State Council announced last month that the government would step up initiatives to upgrade the nation's telecommunications and internet infrastructure, which will include the awarding of 4G network licences in the fourth quarter.
"China Telecom has not yet disclosed its plans to build a trial 4G network," Lai said.
Rival China Unicom announced on August 8 that it would soon build a trial network based on time division long-term evolution (TD-LTE) technology, which is the mainland-developed 4G standard.
China Mobile, the world's biggest wireless network operator by subscribers, completed 4G mobile trials last year on its pilot TD-LTE network. It plans to soon deploy 207,000 TD-LTE base stations across the mainland.
Lai said speculation had been rife that the government would initially grant 4G licences for TD-LTE networks, delaying those for the more mature and widely adopted 4G standard called frequency division duplex long-term evolution (FDD-LTE).
Wang Xiaochu, the chairman and chief executive at China Telecom, has long advocated the adoption of FDD-LTE for the company's 4G network.
Barclays said that reason was based on the existing clear transition roadmap to FDD-LTE from code division multiple access enhance voice-data optimised (CDMA EVDO) technology - the 3G standard that China Telecom supports. "Our analysis shows that China Telecom could have the most to lose if it is awarded a TD-LTE licence," Barclays said.
China Telecom's shares rose 1.01 per cent to HK$3.99 on Friday, their highest close since reaching HK$4.01 on May 21.
