China Telecom expands mobile offerings

22 MAR 2010

China Telecom – the country’s third-largest mobile operator – used its full-year results announcement today to announce deals with RIM and Palm as it continues efforts to make its mobile business profitable. The operator will offer BlackBerry devices in May and Palm’s Pre smartphone in July in a bid to expand its mobile subscriber base. As of end-2009 it had 56.09 million mobile subscribers, a 101 percent year-on-year increase, and is targeting more than 100 million subscribers next year (the same timeframe for mobile business profitability). Its customer base represents a 7.7 percent share of the country’s mobile market. Although it talked up its “superior 3G mobile network service” in a presentation – touting the “most comprehensive & in-depth nationwide 3G network (covering all 342 prefecture-level cities, >2,000 counties, 60 percent towns & villages)” – only 4.07 million of its mobile customers were 3G EV-DO users. The company plans subsidies of more than CNY10 billion to meet its target of adding 30 million mobile subscribers in 2010, including eight million 3G subscribers. Mobile service revenues contributed CNY35.6 billion to total operating revenue of CNY208 billion. Reflecting intense competition in the industry, China Telecom said its mobile services’ ARPU slipped to CNY59.50 per month in 2009 from CNY63.40 in 2008.

Total 2009 full-year net profit at the company rose to CNY14.42 billion from CNY884 million a year earlier, when the company booked a CNY24.17 billion impairment loss on property, plants and equipment mainly associated with the mobile business. Stripping out the one-off impairment loss and amortization of non-cash connection fees, the company said its adjusted profit for last year was CNY13.27 billion, down 34 percent from an adjusted profit of CNY20.07 billion in 2008. Revenue rose 12 percent to CNY209.37 billion from CNY186.53 billion. Unlike rival China Mobile, China Telecom plans to increase its capital spending slightly this year on high-growth broadband and value-added mobile services amid rising competition in the market, which it said poses serious challenges for the company. China Telecom plans capital spending of CNY39 billion this year, up slightly from CNY38.04 billion in 2009. Significantly, the company’s chairman and chief executive, Wang Xiaochu, said the company is offering mobile payment services in 18 cities by teaming with Chinese banks, but has no plan to invest directly in a bank. Earlier this month China Mobile said it plans to buy a 20 percent stake in Shanghai Pudong Development Bank.


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