China Telecom

China Telecom posts stable earnings growth in first nine months

PUBLISHED : Friday, 28 October, 2016, 3:06pm
UPDATED : Friday, 28 October, 2016, 3:36pm

China Telecom Corp plans to accelerate subscriber upgrades at its 4G mobile and fixed-line broadband businesses after posting stable earnings for the nine months to September 30.

In a filing with the Hong Kong stock exchange on Friday, China Telecom chairman and chief executive Yang Jie said the company was also focused on “seizing new development opportunities for transformation”.

China Telecom reported a 7.2 per cent increase in total net profit to 17.543 billion yuan (HK$20.068 billion) for the past three quarters, up from 16.361 billion yuan in the same period last year, on the back of strong growth in 4G network users and mobile service revenue.

The world’s tenth largest wireless network operator estimated it had 212.49 total mobile subscribers at the end of September, of whom 107.49 million are 4G users.

Its revenue grew 7.1 per cent to 263.816 billion yuan from 246.317 billion yuan a year ago.

Mobile and fixed-line service revenue rose 5.6 per cent to 233.494 billion yuan, compared with 221.067 billion yuan a year earlier.

Total fixed-line broadband subscribers reached 120.72 million as of September 30, which included 97.68 million users of high-speed, fibre-to-the-home service.

Yang said China Telecom “showed robust growth momentum” despite increased network operations and support cost, personnel expenses, as well as selling, general and administrative spending.

He pointed out that the company is now paying tower asset lease fees to China Tower Corp, the infrastructure-sharing joint venture it established with China Mobile, China Unicom and state asset-management firm China Reform Holding.

Last year, the three state-backed operators agreed to sell and transfer assets worth a combined 214 billion yuan to the joint venture.

That massive asset infusion was expected to advance the joint venture’s goal of reducing duplication and redundant construction of telecommunications towers and related infrastructure in the world’s second-largest economy.

According to Bernstein Research, China Telecom expected to maintain its 97 billion yuan capital expenditure guidance for this year.

“In the second half of this year, the company will start refarming its 800-megahertz [mobile] spectrum in rural areas to enable 4G deployment,” Bernstein senior analyst Chris Lane said in a report.

Refarming is the reassignment of government-regulated radio spectrum for services with higher value. In the case of mobile operators, that process is now being done with spectrum originally assigned for 2G services to more advanced 4G services.

“In 2017, China Telecom will extend that [shift of spectrum use from 2G to 4G] to the urban areas to help support VoLTE deployment.”

VoLTE stands for voice over LTE, which represents the 4G technology known as Long-Term Evolution.

Before VoLTE became available, 3G and 4G network operators around the world kept their legacy 2G networks because they needed it for voice transmission. Since VoLTE enables voice traffic over 4G networks, operators can phase out their 2G systems and free up spectrum resources.

China Mobile, the world’s largest wireless network operator, had earlier announced it would have VoLTE capability in 260 cities across the mainland this year. China Unicom started its VoLTE trials early this year.

Bernstein’s Lane also said China Telecom’s network-sharing arrangement with Unicom was “progressing well”.

The two operators now actively share 60,000 4G mobile base stations, as well as 14,500 kilometres of fibre transmission network.

In January, Unicom and China Telecom agreed to an ambitious cooperation deal that aims to narrow the 4G network gap with domestic market leader China Mobile and lower their capital spending by sharing costs on new rural 4G network deployments.