China Telecom 1H profit slips 4%, sees strong 4G growth

21 Aug 2015

China Telecom, the country’s smallest mobile carrier by subscribers, said on Wednesday its half-year profit fell 4% year-on-year to 11 billion yuan ($1.7 billion), despite a strong growth in its 4G business in the first half.

Operating revenues for the first half year ended June 30 fell by 0.6% to 164.95 billion yuan and EBITDA rose slightly 0.4% to 50.74 billion yuan, while EBITDA margin stood at 34.5%.

Telecom service revenue remained flat at 147 billion, but mobile revenue rose 0.6% to 62.2 billion yuan, while wireline revenue down 0.4% to 84.5 billion yuan.

China Telecom chairman and chief executive Wang Xiaochu blamed the results for the regulatory requirements such as the value-added tax reform introduced June last year.

The recent regulatory policy [speed upgrade & tariff reduction] requiring telecom operators to upgrade broadband speed and reduce tariffs also put pressure on the company’s profitability, Wang added.

“Excluding the impact of the VAT reforms and recent regulatory requirements to cut tariff, our net profit actually rose by 11.3% and revenues by 3.5%,” Wang told reporters a media briefing in Hong Kong on Wednesday.

The company, which was granted a nationwide FDD license earlier this year, has been accelerating the buildout of 4G networks during last six month to catch up with bigger rivals China Mobile and China Unicom in the 4G race.

The company spent 17.8 billion yuan on 4G network construction and service promotion in the first half.

It paid off, with 4G subscribers rising rapidly to 29 million in the period from 7 million at the end of 2014. 4G ARPU stood at 86 yuan, 56% higher than the blended 3G/4G ARPU of 55.1 yuan.

Yet China Telecom said the APRU may continue to fall due to regulatory policy.

“If the government is not going to introduce any new policies [related to the “speed upgrade and tariff reduction”] in the second half of the year, [I believe] ARPU will eventually go up,” Wang told reporters at the in Hong Kong on Wednesday.

As part of its continuous push on 4G, China Telecom has launched commercial LTE-Advanced service with downlink speed of up to 300Mbps and uplink speed of 50Mbps in selected cities early this month and will speed up its 4G rollout in the second half of the year, Wang said.

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