China Telecom to pour $9.7b into 4G, reports flat '14 profit

Fiona Chau
19 Mar 2015

China Telecom is stepping up its investments on 4G this year as the company looks to 4G services to drive growth amid the saturated mobile market in the country.

Speaking at a media briefing yesterday, China Telecom chairman and CEO Wang Xiaochu said the company will boost its capex this year by over 40% to 107.8 billion yuan ($17.3 billion), with mobile network investment more than doubling from last year to 63 billion yuan ($10.1 billion). Of this, 60 billion yuan ($9.7 billion) will be used on 4G network development, with the remainder going towards 2G and 3G network enhancement.

The company, which was granted an FDD LTE license last month, aims to expand its LTE network coverage to 120 key cities across the country by adding 200, 000 4G base stations and 80,000 indoor radio distributions systems this year, raising its total to 320,000 and 140,000 by year-end.

The announcement comes as the country’s smallest mobile carrier reported on Wednesday a nearly flat revenue and net profit for the year ended December 31, 2014.

Net profit rose slightly by 0.8% to 17.7 billion yuan on revenues of 324.4 billion yuan, while EBITDA slid by 1.8% to 94.9 billion in 2014.

China Telecom said the figures were affected by the implementation of value-added tax (VAT) on telecom services in June 2014 - which China Telecom said has an adverse impact on the company in the short term. But the operator expects that it will be beneficial for its sustainable development in the long term.

In addition, China Telecom also saw a sluggish mobile subscriber growth last year due to the limited progress on 4G.

The company suffered significant mobile subscriber losses in the first half of 2014, but rebounded strongly in the second half after being cleared to expand its hybrid FDD/TDD LTE trials to 40 cities in August, and ended 2014 with around 400,000 more customers than it had a year earlier.

As a result the operator's total mobile subscriber base reached over 185 million, of which 67% or 118.6 million were 3G/4G subscribers. 3G/4G APRU fell 5.6% to 67.5 yuan while overall mobile ARPU slid 1.5% to 54 yuan.

Mobile revenue rose 5.7% to 120 billion yuan. Although revenue from mobile voice declined 6.1% to 54.67 billion yuan, data revenue jumped 18% to 65.58 billion yuan.

Looking ahead, Wang expects intensifying market competition to gradually lead to an era of competition for existing customers, but he said “the company has full confidence in its future prospects."

“The company will seize the crucial opportunities from the issuance of 4G license and the sharing of tower resources,” Wang said. “We will increase investment and promote the rapid development of mobile services in full strengths, especially the profitable scale development of its 4G services.”

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