China Telecom’s Q1 results were hit by the country’s new value-added tax (VAT), with its net profit dropping 9 per cent and revenue declining 2 per cent compared to a year ago.
The company’s unaudited results showed that net profit fell to CNY5.05 billion ($823 million) and EBITDA decreased 2.2 per cent to CNY24.5 billion. Its operating revenue decreased to CNY81.45 billion, while service revenue fell 0.4 per cent to CNY72.7 billion.
Last week China Unicom also blamed changes to the country’s taxation for a slight fall in revenue and profit.
In addition to the impact of the new VAT, which went into effect last June, the operator said its revenue was impacted by an company-wide initiative designed to streamline its marketing efforts and improve operational efficiency.
On the positive side, the country’s third largest (and smallest) mobile operator added 3.2 million mobile connections in the quarter, bringing its total to 188.8 million and continuing the turnaround started in Q4 (reversing three quarters of subscriber losses).
The operator said it now has 16.75 million 4G users, up almost 10 million during the quarter. It has a total of 125 million 3G/4G connections. It said ARPU fell slightly compared last year.
As its 4G network rollout picked up steam, after the government awarded it a nationwide FDD-LTE licence, its network operations and support expenses increased by 28.3 per cent over the same period last year.
Its selling, general and administrative expenses were down 34.4 per cent as it started to benefit from cost-optimisation initiatives covering marketing and resource utilisation.
Its wireline broadband subscriber base increased by 1.24 million, giving it a total of 108 million subs at the end of Q1.