ChinaWatch: Warning & Surfing

China Telecom Corp. Ltd. (NYSE: CHA) has been in the thick of things this week, with some new apps developments and a scare for its investors.

China Telecom issues profit warning
Somewhat out of left field, China Telecom issued a profit warning to the Hong Kong Stock Exchange stating that its financial results for the year ended December 31, 2008, will be significantly lower than those for the previous year. (See China Telecom Warns on Profits.)

The carrier says it's likely to record a "significant" writedown on the value of its PAS (personal access system) assets: PAS is a wireless local access system based on Personal Handyphone System (PHS) technology. That writedown will likely result in a much lower profit figure for 2008 compared with a year earlier, when the company reported net income of 22.5 billion Yuan Renminbi (US$3.3 billion) from revenues of RMB175.4 billion ($25.6 billion).

China Telecom noted that the writedown will not affect the cash flow of its business and will actually lead to a reduction in the depreciation of such assets in future years.

Surfing and searching
China Telecom and Microsoft Corp. (Nasdaq: MSFT)'s MSN Group are jointly developing a new instant messaging solution called eSurfing Live, according to this report from ChinaTechNews.

The service is in beta test phase, and will support short message functions, integrate with China Telecom's existing services, including My eHome and eSurfing Cards, and interoperate with Windows Live Messenger accounts.

China Mobile Ltd. (NYSE: CHL), meanwhile, has renewed its search engine deal with Google (Nasdaq: GOOG)'s Chinese operation, according to a separate report from ChinaTechNews.

The Chinese publication reports Dr. Kai-Fu Lee, vice president of Google Worldwide and president of Google Greater China, saying that the company’s next target in China is to ensure its handset-based mobile search services overtake those accessed through PC-based Internet search.

WiMax player heads for the big city lights
U.S.-based outfit ChinaTel Group Inc. (OTC: CHTL) reports that the first phase of its 3.5 GHz WiMax network build-out in Beijing, Shanghai, Shenzhen, Guangzhou, and Nanjing will be operational by the end of this year. This is the first phase of a network deployment planned for a total of 29 cities, with operations beginning in the remaining 24 cities during the next two years. (See CHTL Plans WiMax in China.)

— Catherine Haslam, Asia Editor, Light Reading

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