China Telecom hikes earnings 10% on strong digital growth

China Telecom has joined counterparts China Mobile and China Unicom in handing down robust full-year numbers, reporting a 10% rise in net income to 30.4 billion Chinese yuan (US$4.2 billion). 

Its industry digitalization business once again led the way, clocking 18% higher revenue of RMB138.9 billion (US$19.2 billion), most of it derived from its high-flying cloud unit, which grew by more than two-thirds.

The no. 2 Chinese telco recorded strong growth across the board by industry standards, with revenue up 6.7%, service revenue 6.9% higher, and EBITDA (earnings before interest, tax, depreciation and amortization) gaining 5%, according to a regulatory filing Tuesday.

On the spending side, its capex bill was RMB98.8 billion ($13.7 billion), a 6.8% rise, while operating costs were 6.3% higher, including a 9% increase in network costs and a 10% spike in labor expenses.

A big part of the higher personnel cost is the acceleration in R&D spend. Last year the company boosted research investment to RMB13.1 billion, up 12% from 2022 and nearly three times higher than in 2020.  

R&D now 12% of headcount 

The number of R&D staff has risen two and half times over the same period, with the research team now 33,000, or nearly 12% of total headcount.

The core mobile business is still delivering tepid results, however. Mobile revenue gained just 2.4%, despite a 12% growth in value added business, and its huge customer base of 408 million returned ARPU of just RMB45.4 ($6.29), up 0.4% for the year. 

The broadband and smart home business fared better, achieving 3.8% revenue growth and with ARPU improving 2.8% to RMB47.6 ($6.59). 

Chairman Ke Ruiwen said the company is now focusing on the following major technologies: cloud, network, AI, security and quantum.

Among its technology achievements last year, the company cites the deployment of another 8.1 EFLOPS of computing power to take the total to 11.0 EFLOPS, and the integration of its cloud and quantum computing capabilities.

It also expanded its Yunxiao and Huiju intelligent computing platforms to ensure they can support AI applications and large-scale training and inferencing.

The company announced it would increase its full-year dividend pay-out by 19.0% this year. The dividend now accounts for more than 70% of net profit and over the next three years will be gradually increased to above 75%, China Telecom said.