Strong 3G performance fends off decline as competition hits Telecom’s customer base

27 Aug 2014

Buoyed by expansion in the fixed broadband and mobile data segments, China Telecom has booked a 5.3% increase in operating revenues for the first half of 2014 compared to the corresponding period of 2013. The telco registered turnover of CNY165.973 billion (USD26.923 billion) for the six-month period, of which CNY61.979 billion was derived from mobile services (excluding handset sales) – up 13.5% year-on-year – whilst CNY87.383 billion was from fixed line services, an increase of 3.2% y-o-y. EBITDA for the six-month period was CNY50.538 billion, up from CNY50.130 billion in H1 2013. Net profits were CNY11.436 billion, although Telecom notes that excluding the impact of the tax reforms, net profit was CNY123.347 billion. In the fixed space, China Telecom registered 4.03 net new broadband subscribers to bring the total to 104.13 million customers, of which 33 million were fibre-to-the-home (FTTH) users, up from 27 million a year earlier. Fixed line voice services continued a downward trend, the number of lines in service dipping by 6.58 million to 149.22 million, whilst local and long-distance traffic fell by 11.5% and 13.5% respectively.

China Telecom has seen a decline in its overall mobile customer base, although it has continued to add 3G subscriptions and with 3G ARPU remaining stable at CNY72, the cellco registered an increase in blended ARPU, from CNY54.3 to CNY56.5. Mobile subscriptions fell from 185.58 million to 180.24 million, whilst 3G subscriptions increased by 4.13 million to 107.24 million, accounting for just under 60% of the total user base. Telecom attributed the decline in mobile subscriptions to increasing competition, primarily due to the launch of 4G services. On the 4G front, China Telecom noted that it has launched 4G services in 16 cities, covering 100 million people and representing around 20% of the cellco’s mobile data traffic. By the end of the year Telecom aims to have around 100 4G handsets available, whilst its network will consist of 140,000 base stations and 60,000 indoor radio distribution systems at that date.

Chairman Wang Xiaochu explained that: ‘The company will firmly seize the 4G development opportunities, fully leveraging the competitive strengths of [its] hybrid network trial to develop a good reputation amongst subscribers. The company will actively cultivate the 4G terminal industry chain to build a mature, complete efficiently-centralised 4G operating system. The company will also actively apply for the expansion of the LTE [Long Term Evolution] hybrid network trial footprint and LTE FDD [Frequency Division Duplex] licence so as to get full prepared for the comprehensive launch of 4G.’

China, China Telecom Corporation