China Telecom Q3 down 7.8% as costs rise

China Telecom Q3 down 7.8% as costs rise

Fiona Chau  |   October 30, 2012
China Telecom has posted a decline in profit for a third straight quarter, blaming for rising costs on handset subsidies and 3G services.
The country’s smallest mobile carrier posted a 7% drop in its net profit to 3.8 billion yuan ($608.2 million) for the three months ended September, making it the only operator in China suffering a decline in quarterly profit. 
Comparatively, China Unicom reported a 27% gain in its Q3 profit, while biggest rival China Mobile saw its Q3 profit jumped by 1.3%.
In a statement released Monday, China Telecom attributed the decline in growth to “significant increase in the costs of mobile terminals sold and operating expenses.” 
The operator, which started selling Apple’s iPhone in March, increased subsidizing and promoting 3G smartphones, especially the iPhone, as it tries to lure more data users to its EVDO network. 
The company spent a hefty 11.5 billion yuan on handset subsidizes in the first half and planned to allocate similar amount of budget on handset subsidies in the second half, chairman and CEO Wang Xiaochu said earlier during its announcement of first half results in August.
As a result, net profit in the first nine months ended September 30 also fell 7.8% to 12.64 billion yuan ($2.02 billion), from 13.72 billion yuan a year earlier. Despite that, revenues rose 15.1% on-year to 209.98 billion yuan, while EBITDA (before CDMA network capacity lease fees) grew 0.9% to nearly 73.13 billion yuan.
Meanwhile, 3G subscribers reached 59.72 million, after the company added another 23.43 million to its EVDO network in the first nine months. Comparatively, China Unicom added more than 26.8 million W-CDMA users, growing its 3G subscriber base to 66.86 million. Biggest rival China Mobile signed up 24.38 million new users to its struggling TD-SCDMA service, ending the period with a 3G subscriber base of 75.6 million. 
China Telecom warned it is expected to face “short-term pressure on profitability,” but expects the iPhone subsidies to “enhance long-term sustainable growth and value creation for the company.”
Mainland media reported that the operator, along with rival China Unicom, is expected to launch Apple’s iPhone 5 by the end of this year. 
Key statistics of Chinese mobile carriers, January – September, 2012
Jan-Sep, 2012 China Telecom  China Unicom  China Mobile  
(YoY change in %)  (YoY change in %) (YoY change in %)
Net profit RMB12.64b (-7.8%)  RMB5.453b (29.9%) RMB93.31b (1.3%)
3G subscribers 59.72 million  66.86 million 75.6 million
Net 3G users 23.43 million  26.84 million 24.38 million
APRU (2G & 3G) RMB52.7 NIL RMB 67
 Source: Operators statistics and Telecom Asia
Fiona Chau


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