China Telecom sees net profit edge up 1.2 per cent to US$2.57b in first 3 quarters as it reels from VAT scheme, rules on subsidies

Mobile subscribers hit 194.34 million as of September 30, with nearly 1/4 using 4G as carrier focusses on migrating subscribers to faster service

PUBLISHED : Wednesday, 28 October, 2015, 6:43pm
UPDATED : Thursday, 29 October, 2015, 12:30pm

China Telecom, which saw modest earnings growth in the first nine months of this year, is pushing for a faster 4G network roll-out amid greater efforts to switch more subscribers to its mobile broadband service.

“The company will encourage more customers to increase data usage,” Chang Xiaobing, the newly appointed chairman and chief executive of China Telecom, said in a regulatory filing on Wednesday.

China Telecom reported a 1.2 per cent increase in net profit for the three quarters ended September 30 to 16.36 billion yuan (US$2.57 billion), up from 16.17 billion yuan in the same period last year.

It said the nine-month financial results were negatively affected by the central government’s implementation of a value-added tax scheme and directive to the country’s three telecommunications carriers to reduce monthly tariffs and handset subsidies.

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Total revenue advanced 1.1 per cent to 246.32 billion yuan from 243.61 billion yuan a year ago.

Service revenue - excluding mobile phone sales, fixed-line equipment sales and other non-service income - rose 1.9 per cent to 221.07 billion yuan from 217.02 billion yuan the previous year.

Mobile subscribers reached 194.34 million as of September 30, of which 43.73 million are 4G mobile users.

A report by Barclays said accelerated 4G adoption in mainland China was driving higher revenue momentum for the domestic telecommunications industry, which should alleviate concerns about further policy risks.

“We expect mobile services revenue growth to continue to tick up for ... China Telecom,” said Anand Ramachandran, the head of Barclays’ telecommunications, internet and media equity research in Asia, excluding Japan.

China Telecom, which operates the largest fixed-line network in the country, said the number of traditional local-access lines continued to decrease.

It counted 6.67 million local-access lines in service at the end of September, compared with 9.49 million in the same period last year.

Fixed-line broadband subscription, however, showed strong growth. The number of fixed-line broadband subscribers increased to 111.09 million as of September 30, up from 105.71 million a year earlier.

Chang expected China Telecom to speed up its 4G network deployments on the back of the infrastructure-sharing joint venture, China Tower Corp, which it established in July last year with China Mobile and China Unicom.

READ MORE: China Telecom sees tower-sharing venture accelerating 4G network expansion

All three operators this month agreed to sell and transfer assets worth a combined 214 billion yuan to that venture, which will be responsible all the construction, maintenance and operations of telecommunications network towers and auxiliary infrastructure across the mainland.

Once their asset disposals are completed, China Mobile’s stake in China Tower will be 38 per cent, Unicom’s 28.1 per cent and China Telecom’s 27.9 per cent. Asset-management firm China Reform Holding will inject 9 billion yuan in China Tower and receive a 6 per cent stake.

Ramachandran said the towers and related asset sales to the joint venture will most likely be completed by the end of this month. Barclays estimated about 1.5 million towers are included in this massive asset infusion.

“But, if this deal is not concluded by then, it could be delayed for a much longer period of time,” Ramachandran said.

Shares of China Telecom were down 0.24 per cent to close at HK$4.19 on Wednesday.