China Telecom – the country’s third-largest mobile operator – has reported a 29 percent decline in net profit for the first half of the year due to higher costs at its mobile division, reports Dow Jones Newswires. Chairman and CEO Wang Xiaochu said the firm’s mobile unit – which it acquired last year from China Unicom as part of the restructuring of China’s telecoms sector – could become profitable by either 2011 or 2012 depending on levels of competition. Net profit at the firm for the six months ended 30 June fell to CNY9.00 billion (US$1.32 billion) from CNY12.63 billion a year earlier, but was higher than the average CNY8.30 billion forecast by eight analysts polled by Dow Jones. Revenues rose 14 percent to CNY103.15 billion from CNY90.38 billion. China Telecom’s total mobile subscriber base rose 11.37 million in the first half of the year to 39.28 million by the end of June, including 1.3 million 3G mobile subscribers. It said its share of net mobile additions rose from 12 percent in January 2009 to 28.7 percent in June 2009.
However, profits were hit by rising costs as China Telecom concentrated on improving and expanding mobile network coverage and funding handset subsidies. The company said selling, general and administrative costs in the first half rose 60 percent to CNY17.60 billion from CNY11.00 billion from a year earlier, mainly driven by handset subsidies of CNY4.84 billion. Wang said handset subsidies will account for about 37 percent of the company’s full-year mobile revenue, higher than the 30 percent it guided for earlier. The operator’s EBITDA margin fell to 42.6 percent from 50.1 percent a year earlier, while ARPU was “stable” at CNY63.6. Wang said that China Telecom had expanded its 3G network to 342 cities and more than 2,000 counties by the end of July and had expanded its handset portfolio to include around 300 models.