China Telecom, the country’s third largest mobile operator, posted disappointing results for the first half of the year, blaming a reduction in data tariffs and the impact of the country’s VAT reform.
After the government complained about high prices and slow data speeds in April, the operator has introduced lower mobile and fixed broadband rates, which it said has put pressure on revenue and profit. Mobile ARPU was down 2.5 per cent year-on-year.
Its net profit for the period fell 4 per cent year-on-year to CNY10.98 billion ($1.71 billion), while operating revenue fell 0.6 per cent to CNY164.95 billion and service revenue was flat at CNY147.02 billion.
EBITDA rose 0.4 per cent to CNY50.74 billion, and its EBITDA margin edged up 0.1 point to 34.5 per cent.
Mobile revenue bucked the downward trend in turnover, rising 0.6 per cent to CNY62.35 billion, with data revenue growing 17.5 per cent to CNY37.4 billion, but voice turnover fell by the same percentage to CNY24.88 billion. With ongoing government pressure to lower handset subsidies, terminal sales declined 3.9 per cent to CNY15.96 billion.
Wireline service revenues fell 0.4 per cent to CNY84.68 billion, accounting for 58 per cent of service revenue.
China Telecom, with a 15 per cent market share, added 5.82 million new mobile connections in H1 to reach 191.4 million. Its 4G base rose by 22 million to almost 29 million connections, the company said.
Average data usage per 3G/4G user expanded 43 per cent to 311MB per month, while 4G users consumed more than double that (700MB).The operator said 4G ARPU stands at CNY86 compared to overall mobile ARPU of CNY55.10.
As its 4G expansion picked up speed, H1 capex jumped 60 per cent from a year ago to CNY36.68 billion and is forecast to increase 40 per cent to CNY107.8 billion for the full year. Mobile capex accounted for 50 per cent of the total for H1 compared to 38 per cent a year ago.
While it plans to deploy 330,000 4G base stations this year, taking its total to 510,000, the company said the country’s tower sharing venture has alleviated the shortage of prime sites and helped speed up its network rollout.
The operator described 2015 as “a crucial year for the company’s 4G scale development and change in the industry competitive landscape.”
In the second half of the year, it said it “will strengthen 4G premier network quality, brand advantage and leading customer experience, taking customer experience as the core.”
To that end, it stated that this month it launched LTE-Advanced services, claiming it as the “fastest on mainland China” with peak download speeds of 300Mb/s and upload speeds of 50Mb/s.
Chairman Wang Xiaochu said the company has “full confidence” it can achieve its goals (although specific numbers were not revealed).