By Paul Mozur
BEIJING--China Telecom Corp. Ltd. (CHA) Wednesday said net
profit fell 9.5% last year from a year earlier, due to increased
costs and competition as it fights with two other major carriers to
attract high-value users.
The largest fixed-line operator by subscribers has been spending
heavily on its mobile services business, bought in 2008 from China
Unicom (Hong Kong) Ltd. (CHU) as part of a government-mandated
restructuring of the telecommunications sector.
China Telecom lags slightly behind China Unicom and China Mobile
Ltd. (CHL) in attracting users to its third-generation mobile
services, which offer faster data speeds and more revenue per user
than more common second-generation services. The company said it
had a 30% market share for 3G subscribers at the end of last
year.
China Telecom began offering Apple Inc.'s (AAPL) iPhone earlier
this year to attract more high-value users, but analysts say
spending on subsidies and marketing is affecting its bottom-line.
China Telecom said it made an "appropriate increase" in iPhone
marketing, which is "expected to significantly enhance the
long-term sustainable growth and value creation despite the short
term pressure on profitability."
Analysts expect China Telecom's net profit to grow by double
digits this year due to its focus on attracting high-value
users.
Net profit for the 12 months ended Dec. 31 fell to 14.93 billion
yuan (US$2.38 billion) from CNY16.50 billion a year earlier, and
revenue rose 15.5% to CNY283.07 billion from a restated CNY245.07
billion in 2011.
The net profit figure compares with the average CNY14.92 billion
forecast of 28 analysts polled by Thomson Reuters.
Selling, general and administrative expenses rose 29.4% to
CNY63.08 billion, and other operating expenses rose 39.7% to
CNY40.34 billion.
The company flagged challenges such as increasing competition,
an uncertain regulatory environment, and the rapid development of
new technology.
China Mobile last week said net profit growth slowed from 2011,
but said it would spend roughly US$7 billion on expanding its
fourth-generation network. Analysts say China Telecom will lag
behind China Mobile in fourth-generation services, though China
Telecom has said it can make the transition quickly.
Write to Paul Mozur at paul.mozur@dowjones.com
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