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China Telecom H1 profit declines

By Wang Xing (China Daily)
Updated: 2009-08-28 08:13

China Telecom Corp yesterday reported a 29 percent fall in net profit for the first half of the year after the country's biggest fixed-line phone carrier said it incurred more costs for marketing its mobile-phone services.

The company is betting big on its next generation products some of which it showcased during a recent telecom exhibition in Nanjing. [China Daily]

Revenue for the six months rose 14 percent to 103.15 billion yuan ($15.10 billion). The company's net profit for the period fell to 9 billion yuan from 12.63 billion yuan a year back.

Wang Xiaochu, chairman and chief executive of China Telecom, said he expects business to recover next year.

He said the company's mobile business, acquired from China Unicom as part of an industry restructuring last year, is expected to become profitable in the next three to four years.

According to the company, selling, general and administrative expenses rose 60 percent to 17.6 billion yuan in the first six months.

China Telecom said despite the short-term pressure on profitability, the increased spending on marketing initiatives would pay off in the long run.

According to the company, China Telecom gained 6.44 million mobile-phone users in the second quarter, compared with 4.93 million in the previous three months. That boosted its total mobile subscriber base to 39.28 million at the end of June, including 1.3 million third-generation mobile subscribers.

Since last year, China Telecom has been betting on its mobile business to challenge the market leader China Mobile.

The company has launched its third generation services based on CDMA2000 standard, which is believed to be more mature than the TD-SCDMA standard that China Mobile has deployed in its 3G network.

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China Telecom said it has invested 4.84 billion yuan in the first half in handset subsidies to boost user base. On Monday, its announced that it would buy 4 million 3G handsets from dozens of domestic mobile phone makers.

Wang estimated that handset subsidies would account for about 37 percent of the full-year mobile revenue, higher than the 30 percent it estimated earlier.

Wang said China Telecom has completed expanding its 3G network coverage to 342 Chinese cities and more than 2,000 counties in the first half of this year.

He said the company is still in talks with Canadian phone maker Research In Motion (RIM) and Palm Inc to introduced their popular handsets in China.