China Netcom,
China's No. 2 phone company, said its profits in the first half of the year fell 7.8% from the same period of 2005 as it faced growing competition from mobile phone services for new customers.
The company reported earnings of 7.09 billion yuan ($887 million) in the six months ending June 30, down from 7.69 billion yuan ($962 million) in the year-earlier period.
Revenue from continuing operations rose 2.2% to 41 billion yuan ($5.1 billion), the company said.
It said its total number of subscribers rose 4.7% to 119.4 million, while the number for its broadband Internet service rose 28.6% to 13 million.
'Growth of the traditional fixed line business was modest due to mobile substitution, but our broadband driven high-growth businesses maintained rapid growth,' chairman Zhang Chunjiang said in a statement.
China Netcom, formed in the breakup of China's former monopoly phone company, has the country's second-largest fixed-line phone network after China Telecom.
China has the world's largest telecom market, with 798 million phone users at the end of July, including 431 million mobile phone customers, according to government figures released this week.
But fixed-line operators have seen subscriber growth slow while mobile services boom, prompting them to turn to multimedia services, broadband Internet and other new technologies to drive revenue growth.
China Netcom said the proportion of its revenues generated by such higher-growth businesses increased to 23.9% this year, up from 19.4% in 2005.