BEIJING - China Telecom Corp., China's biggest phone company, said Monday its 2006 profits fell 2.7 percent amid slow growth for its core fixed-line business but total revenues rose on strong demand for Internet and other new services.

China Telecom Chairman & Chief Executive Wang Xiaochu speaks during a news conference announcing the company's 2006 annual results in Hong Kong March 26, 2007. [Reuters]

Net profit was 27.1 billion yuan (US$3.5 billion; euro2.6 billion), the Beijing-based company said. It said revenue from Internet services rose 32 percent while local phone revenues fell 3.5 percent. Total revenues grew 3.4 percent to 175 billion yuan (US$22.6 billion; euro17 billion).

China Telecom, which is traded on the Hong Kong stock market, did not release quarterly results.

China's fixed-line phone carriers are expanding broadband, Internet-based TV and other new services to make up for slowing growth as more potential customers opt for mobile phones.

Those initiatives "have not only abated the challenges on our traditional business operations, but also led to sustained growth in our overall revenue and profit," Wang Xiaochu, the chairman and CEO, said in a statement.

By contrast, China Mobile Corp., the country's biggest mobile carrier, said last week its 2006 profits rose 23 percent.

China has the world's biggest telecoms market, with 461 million mobile phones and 368 million fixed-line phones as of January, according to the government. It says the number of mobile phones is expected to grow by 60 million this year, while fixed-line phones will rise by 10 million.

China Telecom's results were hurt by lower connection fees. The company stopped charging for phone-line installation in 2001 but has been booking deferred income, with the amount falling each year.

Excluding connection fees, net profit rose 4.9 percent to 22.2 billion yuan (US$2.9 billion; euro2.2 billion), the company said.

The number of residential and business fixed-line subscribers rose 6.2 percent to 223 million, while the number of broadband Internet customers soared 34.7 percent to 28.3 million, the company said.