Phone
“To build up the business, spending must go up,” Wang told reporters in Hong Kong today. Chinas biggest fixed-line carrier will use as much as 30 percent of its mobile-phone revenue this year for handset subsidies, according to Wang, who described the wireless operations as the companys main focus.
China Telecom aims to add 30 million mobile-phone users this year, more than doubling customers at the unit acquired from China Unicom (Hong Kong) Ltd. in October, Wang said. The company, which today reported a 96 percent decline in profit on falling fixed-line earnings, seeks to narrow the gap with China Mobile Ltd., the worlds biggest wireless carrier.
“They pose a threat to China Mobile,” said Steven Liu, a telecommunications analyst at DBS Vickers Ltd. in Hong Kong. “China Telecom is able to cross-sell mobile services to its existing fixed-line user base, and it offers a differentiated product compared with the competition,” said Liu, who recommends investors buy China Telecom and China Mobile stock.
China Telecom is expected to increase mobile-phone revenue to 34 billion yuan ($5 billion) this year, according to the median of three analysts estimates in a Bloomberg News survey. Based on this projection, handset subsidies may cost the Beijing-based company as much as 10.2 billion yuan in 2009.
Bond Sale
Wang said China Telecom will issue as much as 90 billion yuan of bonds this year to finance spending on its mobile operations and repay some existing loans. Selling debt is a cheaper way to raise capital than an offering of company equity, and China Telecom doesnt currently plan to seek a domestic stock listing or sell a stake to a strategic investor, he said.
China Mobile, with more customers than the combined populations of the U.S. and Japan, will increase handset subsidies to 10 billion yuan in 2009 from about 8 billion yuan in previous years, Chairman Wang Jianzhou said in January.
China Telecoms net income last year tumbled to 884 million yuan from 24.2 billion yuan a year earlier after the operator booked a 24 billion yuan impairment charge on its Little Smart limited-range wireless service, the company reported today.
China Telecom shares rose 1.9 percent to HK$3.19 in Hong Kong trading, extending this years gain to 10 percent. The benchmark Hang Seng Index has lost 3.3 percent in the period.
Capital Spending
Capital spending in China Telecoms mobile-phone network will increase to 47 billion yuan this year, Wang said. The costs will be borne by China Telecommunications Corp., the carriers state-owned parent. The investment will help expand the companys third-generation network to more than 300 cities by July, from about 100 cities at present, Wang said.
Fixed-line voice revenue, including Little Smart sales, declined 14 percent to 96.3 billion yuan last year, China Telecom said. Demand for the cordless service, which only works within a city, has waned as mobile-phone operators reduce charges and expand their networks.
China Telecom added 1.7 million mobile-phone customers last month to increase its total in the wireless division to 30.6 million at the end of February. The former China Unicom unit had 29.1 million customers when it was taken over last October.
China Telecom will offer 3G services, which allow faster downloads of music and video on mobile-phones, using code- division multiple access 2000 technology. China Mobile, based in Beijing, will use the locally developed TD-SCDMA standard.