New | China Telecom sees tower-sharing venture accelerating 4G network expansion
Injection of one million towers into three-way network venture to spur growth in the second half despite 4pc loss in the first six months
China Telecom, which posted a net loss in the first six months of this year, sees brighter prospects in the second half as China's telecommunications industry's infrastructure-sharing joint venture gets fully under way.
Nearly a million network towers are forecast to be injected into this venture to spur growth for the country's three major network operators, despite concerns about economic slowdown on the mainland.
"Tower sharing effectively alleviates the shortage of prime sites, which would drive fast and effective 4G services roll-out," China Telecom chairman and chief executive Wang Xiaochu said on Wednesday. "It will enhance the long-term value for the company and the whole industry."
In July last year, China Mobile, China Unicom and China Telecom formed a joint venture called China Communications Facilities Services Corp - renamed China Tower last September - to handle the construction, maintenance and operation of telecommunications network towers and auxiliary infrastructure across the country.
The central government has not made any formal announcement on how this asset-infusion plan would be accomplished and the valuation of each tower put into the venture.
Bernstein senior analyst Chris Lane said he expected more details about the joint venture to be announced in October.
Wang, however, disclosed oln Wednesday that infrastructure-sharing has started.
He said about 70 per cent of an initial pool of 60,000 towers provided by the joint venture were put to use in the first half.
That resulted in about six billion yuan of 4G capital expenditure savings for China Telecom during that period, according to Wang.
None of the three operators have disclosed the exact number of towers they own, so analysts' estimates have varied.
Bernstein Research calculated in February that there were a total of 765,000 towers, while Barclays put that number at 999,999 as of December 31.
In a report last month, Bernstein estimated the total value of the tower assets "to be around 250 billion yuan, or [roughly] US$40 billion".
On Wednesday, China Telecom reported a 4 per cent decline in its interim net profit to 10.98 billion yuan, down from 11.44 billion yuan in the same period last year, mainly due to the impact of mainland regulatory requirements such as the value-added tax reform. Revenue was flat at 164.95 billion yuan.
The operator also said it added 12 million 4G users in the second quarter to bring its total 4G subscriber base to 29 million.
Following its results announcement, China Telecom's share price finished down 0.71 per cent to HK$4.20 - its lowest close since reaching HK$4.14 on July 9.
"Retail investors tend to look at the reported numbers, but we saw quite a strong bounce-back in mobile service revenue in the second quarter," Lane said.
China Telecom reported a 3.3 per cent year-on-year increase in mobile service revenue last quarter.
