China Telecom said its net profit fell 33.9% year on year in 2009, due to heavy investment in 3G and increased cost on network operations and support.
The fixed-line carrier reported a net profit of 13.3 billion yuan ($1.95 billion), compared to 20 billion yuan in 2008. Full-year operating revenues rose 12.9% to 208 billion yuan, while ebitda shrank 4.4% to 82.1 billion and ebitda margin declined 7.2 points to 39.4% from a year earlier.
Chairman and CEO Wang Xiaochu said the company would halve mobile network investment this year to 27.7 billion yuan, and would restrict handset subsidies to less than 33% of its revenue.
“When we took over the CMDA network [from China Unicom], we said our business would go through a “V” shape transition. We were at the bottom of the “V” shape in 2009.” he said. “We expect to see an increase in our profit this year and our target to make our mobile business profitable in 2011 remained unchanged.”
Operations and support costs rose 18.9% to nearly 43 billion yuan, largely due to increased investment in transformation services and an increase in CDMA network leasing fees, which amounted to 8.4 billion yuan.
Mobile service revenues rose six times to 30 billion yuan, compared to 5.4 billion yuan in 2008. Mobile subscriber numbers doubled to nearly 56.1 million, with market share growing from 4.5% in 2008 to 7.7% last year, thanks to its 10 billion yuan in phone subsidies.
Of the total, nearly 4.1 million signed up to the 3G network, well above rival China Mobile, which had 3.4 million 3G users last year.
The company hopes to add 30 million new subscribers this year, and is confident that it can meet its target of 100 million users by 2011, Wang said.
In contrast to the flourishing mobile unit, China Telecom’s fixed-line business continues to wilt. Revenue fell 3.2% to 172 billion yuan and voice revenue dropped 18.5% as the company lost 19.8 million access lines.
Wang said the fixed-line business would continue to contract but hoped to slow the loss of customers with offers such as wireline and mobile bundled service packages.
He said mobile services – which contributed 17.1% of total revenue – together with broadband and wireline VAS and integrated information services, would become the company’s three major growth drivers.
Broadband subscribers rose 20.8% to 53.5 million last year, generating over 47 billion yuan of revenues, up 17.1%. Wang said increased bandwidth demand driven by new applications and the low broadband penetration rate in household (16.7%) offered huge potential for the company.