China Telecom Sees Sales Rise on 4G Take-Up

China Telecom has reported healthy gains in sales and net profit for the first half of the year thanks to growth in its customer numbers and the take-up of pricier 4G services.

The Chinese service provider still lags market leader China Mobile Ltd. (NYSE: CHL) in the country's fast-developing 4G market but remains some way ahead of China Unicom, the second-biggest mobile operator. (See China Unicom Upbeat Despite Falling H1 Profits and China Mobile's 4G Boom Fuels Profit Growth.)

Operating revenues in the first six months rose 7.2% compared with the year-earlier period, to 176.8 billion Chinese yuan ($26.6 billion), while net profit grew 6.3%, to RMB11.7 billion ($1.76 billion).

China Telecom Corp. Ltd. (NYSE: CHA) reported a slight dip in EBITDA -- down 0.4%, to RMB50.6 billion ($7.6 billion) -- because of tower-leasing fees and an increase in sales and marketing costs, but its bottom line was helped by a reduction in financing costs and an improvement in investment income.

The operator picked up another 9 million mobile customers in the first six months of the year, giving it nearly 207 million in total, and saw the number of subscribers using 4G services grow by 31.7 million, to 90.1 million.

Earlier this month, China Mobile revealed it had more than 428 million 4G customers, while China Unicom Ltd. (NYSE: CHU) now serves about 73.9 million.

Mobile Customers at China's Operators (Millions)
Source: Operators.
Source: Operators.

Besides focusing on the rollout of 4G services, China Telecom has been investing heavily in fixed-line broadband services and flagged encouraging progress in this business, too.

The company's base of wireline broadband customers grew by almost 5 million, to 118 million subscribers. More than 88 million of those are using fiber-to-the-home services, up from 80 million at the end of last year.

China Telecom invested about RMB40.7 billion ($6.1 billion) in capital expenditure during the first half, 11% more than in the first six months of 2015, but expects capex for the full year to fall to around RMB97 billion ($14.6 billion), from RMB109 billion ($16.4 billion) in 2015.

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Among other things, the operator is refarming spectrum in the 800MHz band to provide a "network foundation" for voice-over-LTE (VoLTE) and NB-IoT services.

VoLTE would allow China Telecom to run voice calls over its 4G network, potentially freeing up other airwaves, while NB-IoT could be used to meet rising demand for so-called low-power, wide-area (LPWA) connectivity.

Such capabilities will be needed to support objects that transmit small amounts of bandwidth and may be operational for many years, such as smart meters and asset-tracking devices.

Last month, China Telecom unveiled plans to roll out a nationwide NB-IoT network during the first half of 2017.

The operator is one of several big cellular players to have thrown their weight behind the NB-IoT standard, which was included in the 3rd Generation Partnership Project (3GPP) 's Release 13 in June. (See The NB-IoT Train Is Coming.)

In the immediate absence of a low-cost technology that uses licensed spectrum, a number of operators have turned to proprietary technologies relying on unlicensed frequency bands, including Sigfox and LoRa.

China Telecom is eyeing a major role for itself in the burgeoning Internet of Things market, outlining plans to become a "leading integrated intelligent information services provider" in a statement accompanying its latest set of figures.

"Our business structure was continually optimized while our competitive capabilities were remarkably strengthened," said the company in assessing its first-half performance.

Despite the encouraging results, China Telecom's share price fell by 3.34% in Hong Kong today. The decline likely reflected wider concern about China's economic slowdown as well as China Telecom's ability to compete against China Mobile.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

CloudTelephones 8/26/2016 | 10:15:10 AM
Tom great read Iain, interesting what China's getting up to! http://www.cloudtelephones.co.uk/
Joe Stanganelli 8/24/2016 | 5:26:50 PM
Re: 6 million Even though there are at least three major carriers operating in China, there is substantial room for growth and penetration for all of them.

As things slow down industry-wide, the competition will get more interesting.
danielcawrey 8/23/2016 | 2:26:24 PM
6 million Must be nice to be able to pick up six million new customers in a fiscal period. This is what happens when you have a very desireable service in a hot maket. 

Only in China. Or India. 
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