China Telecom, the smallest of the country's three telecommunications carriers, announced yesterday its first-half profit rose 8 per cent as its mobile phone business thrived despite strong competition.
Revenues of the Beijing-based carrier rose 11.5 per cent to 120.2 billion yuan (HK$146.7 billion) while mobile phone revenues rose 28 per cent to 18 billion yuan.
The company is the country's largest fixed-line operator by subscribers, but business in that section is shrinking as customers increasingly switch to wireless services.
China Telecom said its mobile subscribers rose 45.4 per cent year on year to 108 million. The number of subscribers for third-generation, or 3G, services, which the company only expanded into in the latter half of last year, rose 75.3 per cent to 21.5 million over the past six months.
'3G mobile service and broadband will be drivers for future development and we will invest more in those fields for better returns,' said Wang Xiaochu, the company's chairman and chief executive. 'The mobile business has started making profit in the first half.'
The company was a fixed-line operator until 2008 when Beijing allowed all three giant carriers - including also China Mobile and China Unicom - to restructure the industry and create competition.
Third-generation subscribers now account for about 20 per cent of all mobile users for China Telecom. Wang said the company would increase 3G to further raise the number of subscribers.
The company said its 3G services produced an average revenue per user (ARPU) - a key measure of a communication company's costs - of slightly more than 80 yuan in the first half. That was lower than last year's figure of 90 yuan. Overall, the company's mobile service produced an ARPU of 52.2 yuan, falling from 58.1 yuan a year earlier.
The company's broadband operations, however, produced an ARPU of only 47.3 yuan in the first half and Wang warned increasingly intense competition would exert more downward pressure on that portion of the business.
China Telecom is in negotiations to become the second mainland carrier - after Unicom - to carry Apple's popular iPhone. Wang declined to elaborate on when or how the company would work with Apple, citing a confidential agreement.
'If we introduce new mobile phones, like the iPhone, in the second half then we will increase handset subsidies,' Wang said. 'If we don't, the subsidies should be roughly equal to that of the first half.'
The company is planning to acquire mobile network assets from its parent company next year, and will not pay interim dividends to maintain funding flexibility.
Its capital expenditures in the first half totalled 21 billion yuan, 71 per cent of which was spent on improving speeds on its broadband network. The company's whole-year planned expenditure is targeted at 50 billion yuan.