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March 22, 2011, 7:30 AM EDT
By Bloomberg News
(Updates with plan to buy network in third paragraph.)
March 22 (Bloomberg) -- China Telecom Corp., the country’s biggest fixed-line carrier, said fourth-quarter profit rose 42 percent as its mobile-phone unit more than tripled the number of smartphone users on its network.
Profit excluding gains from connection fees rose to 2.67 billion yuan ($408 million) in the three months ended Dec. 31, from 1.88 billion yuan a year earlier, the Beijing-based company said in a statement on its website today. That compares with the 3.06 billion yuan average of nine analysts’ estimates compiled by Bloomberg.
Chairman Wang Xiaochu boosted the number of users for the company’s third-generation service to 12.3 million at the end of December, from 4.1 million a year earlier, by increasing the variety of handsets on offer. China Telecom now plans to buy the 3G assets it leases from its parent to save money after the cost of leasing the CDMA network rose 59 percent in 2010.
“The reason why they are buying the network is because the leasing fee they are currently paying to the parent company is more than the depreciation of the assets and related finance charges,” Kelvin Ho, a Shanghai-based analyst at Yuanta Securities Co., said by telephone. “If they buy, it will be cheaper and they will save costs. The parent will try to price it attractively so it will be accretive.”
China Telecom paid 13.3 billion yuan as leasing fees to its parent last year, the company said.
Subscriptions Jump
Wang boosted the company’s total number of mobile subscribers 61 percent last year with handset subsidies and promotional calling rates to grab share from market leaders China Mobile Ltd. and China Unicom (Hong Kong) Ltd.
Sales in the fourth quarter rose 5.1 percent to 56.2 billion yuan. That compares with the 59.9 billion-yuan average of nine analysts’ estimates.
China Telecom rose 2.3 percent to HK$4.49 at the 4 p.m. close of trading in Hong Kong. The stock has gained 10 percent this year compared with a 0.8 percent decline in the benchmark Hang Seng Index.
China Telecom will complete the purchase of the 3G CDMA wireless network by the end of next year, Wang said at a press conference in Hong Kong. The network is valued at about 90 billion yuan and the purchase, for which the price is yet to be decided, will be funded with debt, he said.
Apple Talks
The carrier said today it offered subsidies to promote 3G smartphones and increased the number of models to more than 300 at the end of last year from about 100 at the start of 2010. China Telecom is in talks with Apple Inc. about product offerings that Wang said he couldn’t elaborate on.
China Unicom is the only Chinese carrier now offering Apple’s iPhone in the nation’s market. China Telecom’s CDMA network is similar to that of Verizon Wireless, which began selling CDMA iPhones in February.
Higher use of its third-generation network lifted operation costs 10 percent to 47.3 billion yuan last year, while Wang also boosted capital expenditure by 13 percent to 43 billion yuan to expand broadband Internet access. Capital spending will rise to 50 billion yuan this year, Wang said today.
“The biggest concern for investors would be higher capex,” Paul Wuh, a Hong Kong-based analyst at Samsung Securities Co., wrote in a report to clients today. He has a “buy” rating on the stock.
The number of mobile subscribers increased to 90.5 million at the end of December, from 56.1 million a year earlier, China Telecom said in January. The carrier ranks third in wireless users in the Asian nation, behind China Mobile and China Unicom.
‘Prime Period’
“The next two to three years will be a prime period of strategic opportunities,” Wang said. “Mobile Internet is undergoing a rapid growth period and wireline broadband is still enjoying considerable room for development.”
The prospects for growth are accompanied by “intensified challenges from increasingly fierce competition in the existing and new businesses,” he said.
The statement didn’t specify how much was spent on subsidies in the fourth quarter. China Telecom spent 6.1 billion yuan on handset subsidies in the first half of 2010, or about 27 percent of the wireless division’s revenue, Wang said in August. The proportion would be lower than 30 percent for the full year, he said at that time.
China Telecom entered the wireless market in 2008 by acquiring the smaller of China Unicom’s two mobile divisions in a government-led revamp of the Chinese mobile-phone industry.
China Mobile, the world’s biggest phone carrier by users, on March 16 reported fourth-quarter net income rose 3.7 percent to 32.4 billion yuan, beating analysts’ estimates. China Unicom is scheduled to announce results on March 29.
--Edmond Lococo. With assistance from Mark Lee in Hong Kong. Editors: Chua Kong Ho, Hwee Ann Tan.
To contact the reporter on this story: Edmond Lococo in Beijing at elococo@bloomberg.net.
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
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(Updates with plan to buy network in third paragraph.)
March 22 (Bloomberg) -- China Telecom Corp., the country’s biggest fixed-line carrier, said fourth-quarter profit rose 42 percent as its mobile-phone unit more than tripled the number of smartphone users on its network.
Profit excluding gains from connection fees rose to 2.67 billion yuan ($408 million) in the three months ended Dec. 31, from 1.88 billion yuan a year earlier, the Beijing-based company said in a statement on its website today. That compares with the 3.06 billion yuan average of nine analysts’ estimates compiled by Bloomberg.
Chairman Wang Xiaochu boosted the number of users for the company’s third-generation service to 12.3 million at the end of December, from 4.1 million a year earlier, by increasing the variety of handsets on offer. China Telecom now plans to buy the 3G assets it leases from its parent to save money after the cost of leasing the CDMA network rose 59 percent in 2010.
“The reason why they are buying the network is because the leasing fee they are currently paying to the parent company is more than the depreciation of the assets and related finance charges,” Kelvin Ho, a Shanghai-based analyst at Yuanta Securities Co., said by telephone. “If they buy, it will be cheaper and they will save costs. The parent will try to price it attractively so it will be accretive.”
China Telecom paid 13.3 billion yuan as leasing fees to its parent last year, the company said.
Subscriptions Jump
Wang boosted the company’s total number of mobile subscribers 61 percent last year with handset subsidies and promotional calling rates to grab share from market leaders China Mobile Ltd. and China Unicom (Hong Kong) Ltd.
Sales in the fourth quarter rose 5.1 percent to 56.2 billion yuan. That compares with the 59.9 billion-yuan average of nine analysts’ estimates.
China Telecom rose 2.3 percent to HK$4.49 at the 4 p.m. close of trading in Hong Kong. The stock has gained 10 percent this year compared with a 0.8 percent decline in the benchmark Hang Seng Index.
China Telecom will complete the purchase of the 3G CDMA wireless network by the end of next year, Wang said at a press conference in Hong Kong. The network is valued at about 90 billion yuan and the purchase, for which the price is yet to be decided, will be funded with debt, he said.
Apple Talks
The carrier said today it offered subsidies to promote 3G smartphones and increased the number of models to more than 300 at the end of last year from about 100 at the start of 2010. China Telecom is in talks with Apple Inc. about product offerings that Wang said he couldn’t elaborate on.
China Unicom is the only Chinese carrier now offering Apple’s iPhone in the nation’s market. China Telecom’s CDMA network is similar to that of Verizon Wireless, which began selling CDMA iPhones in February.
Higher use of its third-generation network lifted operation costs 10 percent to 47.3 billion yuan last year, while Wang also boosted capital expenditure by 13 percent to 43 billion yuan to expand broadband Internet access. Capital spending will rise to 50 billion yuan this year, Wang said today.
“The biggest concern for investors would be higher capex,” Paul Wuh, a Hong Kong-based analyst at Samsung Securities Co., wrote in a report to clients today. He has a “buy” rating on the stock.
The number of mobile subscribers increased to 90.5 million at the end of December, from 56.1 million a year earlier, China Telecom said in January. The carrier ranks third in wireless users in the Asian nation, behind China Mobile and China Unicom.
‘Prime Period’
“The next two to three years will be a prime period of strategic opportunities,” Wang said. “Mobile Internet is undergoing a rapid growth period and wireline broadband is still enjoying considerable room for development.”
The prospects for growth are accompanied by “intensified challenges from increasingly fierce competition in the existing and new businesses,” he said.
The statement didn’t specify how much was spent on subsidies in the fourth quarter. China Telecom spent 6.1 billion yuan on handset subsidies in the first half of 2010, or about 27 percent of the wireless division’s revenue, Wang said in August. The proportion would be lower than 30 percent for the full year, he said at that time.
China Telecom entered the wireless market in 2008 by acquiring the smaller of China Unicom’s two mobile divisions in a government-led revamp of the Chinese mobile-phone industry.
China Mobile, the world’s biggest phone carrier by users, on March 16 reported fourth-quarter net income rose 3.7 percent to 32.4 billion yuan, beating analysts’ estimates. China Unicom is scheduled to announce results on March 29.
--Edmond Lococo. With assistance from Mark Lee in Hong Kong. Editors: Chua Kong Ho, Hwee Ann Tan.
To contact the reporter on this story: Edmond Lococo in Beijing at elococo@bloomberg.net.
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
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