Strong growth in xiaolingtong users boosts first-half profit Strong growth in xiaolingtong subscribers in the first half has encouraged China Telecom Corp to step up efforts to snatch more revenue from mainland mobile carriers. The fixed-line giant added 5.34 million subscribers in the six months to June - 2.18 million of them xiaolingtong users - to bring its total user base to 62.2 million. 'We were expecting about 20 per cent of our new users to be coming from xiaolingtong, but in the first half year it was actually 40 per cent,' China Telecom chairman and chief executive Zhou Deqiang said yesterday. 'Based on the current run rate, we'll certainly be ahead of our target of signing up eight million total users this year.' At the end of June, China Telecom had 5.37 million xiaolingtong subscribers. The wireless local access network offers cheap but limited mobile-phone services. Company president Chang Xiaobing said China Telecom was well aware of the mobile substitution threat faced by fixed-line services. To stem line losses to mobile carriers, it is increasing efforts to develop value-added services and bundle its fixed-line services with xiaolingtong. The stronger than expected growth in xiaolingtong subscribers in the first half boosted China Telecom's interim results. It reported a first-half net profit of 9.26 billion yuan (HK$8.68 billion), up 9.1 per cent from 8.48 billion yuan in the same period last year, and slightly ahead of most analysts' expectations. However, revenue growth in the six months failed to impress market watchers because of declines in per user spending and traffic volume. Turnover reached 39.54 billion yuan, up 7.2 per cent from 36.87 billion yuan in the same period last year. Local voice traffic edged down 1.1 per cent, despite a 16.8 per cent growth in subscriber numbers. The carrier also saw its fixed-line revenue grow at a much slower pace than subscriber growth, resulting in a 9.8 per cent dip in average revenue per user to 51.8 yuan. Some analysts, including CLSA's Charle Peza and BNP Paribas Peregrine's Voon San Lai, said they would upgrade their full-year forecasts on China Telecom by 2 per cent to 3 per cent because of the carrier's better first-half results. But other analysts warned investors should not be too bullish about the carrier's prospects. 'The interim result was stable, but there are some underlying concerns,' said DBS Vickers Securities' Wallace Cheung, who believed that China Telecom was facing increasing competition in its fixed-line and broadband businesses. China Netcom Group, the fixed-line carrier that dominates northern China, has progressively been rolling out various services on China Telecom's turf, offering both fixed-line and broadband business in major cities such as Shanghai and Guangzhou. Mr Peza said he doubted whether the strong growth in xiaolingtong subscribers would continue for long and was worried that increasing mobile substitution might put a damper on China Telecom's growth prospects. China Telecom shares yesterday fell 5.55 per cent to close at $2.125.