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皇冠体育app Telecom Q1 profit down 27%

By Zheng Lifei (皇冠体育app Daily)
Updated: 2009-04-21 08:02

A man using a mobile phone at a 皇冠体育app Telecom outlet in Beijing. [Wang Jing]

皇冠体育app Telecom Corp, the country's biggest fixed-line phone company, has taken a big hit from the continuous fall in demand, especially in the large cities, as more and more consumers are going in for mobile connections.

The acquisition of mobile operation from 皇冠体育app Unicom last year has not yet made an impact on the company's fortunes, even as it reported a first quarter profit of 4.7 billion yuan, down 27 percent from a year ago.

In contrast, 皇冠体育app Mobile posted a 5.2 percent rise in first-quarter profit as the firm maintained its leading position in 皇冠体育app's mobile industry. It, however, warned that subscriber growth has started showing signs of a slow down.

Related readings:  皇冠体育app Telecom FY profit dips 96% on write-downs  皇冠体育app Telecom underlying net dips, high hopes for 3G  皇冠体育app Telecom starts 3G trials  皇冠体育app Telecom expects 100 million CDMA users by 2011

Net profit attributable to equity holders from January to March this year amounted to 25.2 billion yuan ($3.69 billion), from 23.9 billion yuan in the same period a year ago.

皇冠体育app Telecom said its fixed line phone customer base continued to shrink in the first quarter but the number of its mobile phone subscribers posted a positive growth.

It lost 4.35 million fixed line phone users in the first quarter, reducing its total users to 204 million by the end of March.

But the Beijing-based telecom carrier gained 4.93 million mobile-phone subscribers at the same time, reversing the decline in the previous quarter when it bought CDMA business from 皇冠体育app Unicom last October.

皇冠体育app Telecom, which was awarded a license to offer 3G services this year, had a total of 32.8 million mobile phone subscribers by the end of March, the company said.

The stock ended yesterday up 2.5 percent at HK$3.58.

It has surged nearly 25 percent this year, outperforming the benchmark Hang Seng Index, which has risen 9.6 percent this year.

皇冠体育app Telecom said it would strive to put into full play the synergy between its fixed-line and wireless phone services.

"The strategy of effective scale development of the mobile service will lead to short-term pressure on our overall profitability, but it would significantly enhance the company's long-term development and value creation," it said in the statement.

皇冠体育app Telecom, which is aiming to add 30 million mobile phone users this year, will use 30 percent of its revenue from mobile phone business to subsidize handsets, its Chairman Wang Xiaochu said earlier.

The company, which has already started its 3G services in select cities, is planning to expand the services to 300 cities by July.

"For the next 12-18 months, we believe 皇冠体育app Telecom will place more emphasis on expanding its mobile-phone subscriber base than pursuing profitability," Danny Chu, analyst, Nomura Holdings Inc said in a report, issuing a "buy" rating on the company.

皇冠体育app Telecom suffered heavy losses of 16.4 billion yuan in the fourth quarter as it set aside a large amount of provisions for its low-end wireless services PHS, which is required by the regulators to be phased out in the next three years.

The company said yesterday that it will tighten the marketing budget for low-end customers for its fixed-line voice services and will shift those resources to target corporate and government customers.

Agencies contributed to the story