China Telecom, the country’s third largest operator, last year expanded its 4G users to more than a quarter of its customer base, added 12.4 million new mobile connections and reported a sharp increase in profit despite weak revenue growth.
The operator added more than 51 million 4G customers last year after it received its nationwide FDD-LTE licence in February, taking its total to 58.5 million. 4G users accounted for 26 per cent of total mobile connections, up from 4 per cent in 2014.
By contrast, giant China Mobile (the world’s largest mobile operator) has 312 million 4G customers (38 per cent of its total base) while the country’s number two player China Unicom has 44 million (17.5 per cent of total).
The operator said access to about 500,000 towers now owned by China Towers accelerated its 4G network deployment, allowing it to roll out 4G in all developed towns and villages nationwide and in all towns in the country’s eastern region. It also deployed 4G+ (LTE-Advanced) in 45 key cities.
The company said in its annual report that 2016 is a “crucial year in building up a more favourable market position for the future” and aims to deploy 4G+ in all cities, improve 4G coverage in towns and rural areas with high data traffic, and prepare to launch nationwide commercial VoLTE trials in 2017.
With the transfer of tower assets by all three of China’s operators to the national tower firm completed, China Telecom expects its overall capex this year to drop 11 per cent to CNY97 billion, with 4G capex declining 6.7 per cent to CNY46 billion. It is planning to add 290,000 4G base stations to take its total to 800,000.
Strong profit growth
Despite sluggish revenue growth last year, which was up 2.1 per cent to CNY331 billion ($51.2 billion), its net profit jumped 13.4 per cent to CNY20.1 billion. The increase was boosted by a one-off gain of CNY3.94 billion from the sale of its towers assets. EBITDA fell 0.8 per cent to CNY94.1 billion.
Service revenue for the year increased 2 per cent to CNY293.3 billion, with mobile turnover rising 3.5 per cent to CNY125 billion and fixed-line revenue up just 1 per cent to CNY169 billion. The operator cited the same regulatory obstacles as rival China Unicom — VAT reform, pressure to upgrade broadband speeds and reduce tariffs, and one-month data carry-over – as the reasons for the slow growth.
It said the mobile data unit price dropped 33 per cent last year, while the fixed broadband unit price fell 55 per cent.
A 15 per cent increase in mobile data revenue more than offset a 10 per cent drop in voice revenue. Data accounted for 61 per cent of service revenue, up from 55 per cent in 2014. The monthly average data traffic per 4G user increased 25 per cent to 751MB.
After losing customers for most of 2014, China Telecom expanded its mobile connections to grow 6.7 per cent to 198 million in 2015. It also grew its FTTH user base to 71 million after adding 28.4 million FTTH households last year.
The operator paid an estimated CNY2.7 billion in rental fees last year to China Tower and expects the usage fee per tower to decline as the tenancy ratio increases. The company has a 27.9 per cent stake in the tower firm.