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March 23, 2010

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Telco profit declines due to rise in costs

CHINA Telecom Corp's net profit tumbled 34 percent year on year in 2009 because it incurred higher costs attracting mobile phone users while its fixed-line business declined, the Hong Kong-listed telco said yesterday.

The country's No. 1 fixed-line phone operator, however, gained mobile users at a faster pace last year especially after it launched 3G services nationwide, which piled pressure on market leaders China Mobile and China Unicom.

In 2009, China Telecom's net profit totaled 13.27 billion yuan (US$1.95 billion), a drop of 33.9 percent from a year earlier. Its revenue rose 13 percent annually to 208.2 billion yuan due to its mobile phone business and growing broadband Internet use.

But its monthly average revenue per user, a widely recognized profitability measure in the telecommunications industry, from the mobile business plunged to 59.50 yuan last year from 63.40 yuan in 2008.

China Telecom, the country's No. 3 mobile phone operator, had 56 million cell phone users by the end of 2009, doubled from a year earlier, after it acquired China Unicom's CDMA (code division multiple access) business in a national industry revamp in October 2008. It plans to have 100 million mobile subscribers by 2011.

China Telecom's fixed-line revenue fell 18.5 percent annually in 2009 as more users migrated to mobile phones.

In 2009, the telco's broadband Internet revenue rose 26.6 percent annually to 51.56 billion yuan.

China Mobile last week reported a 2.3 percent annual rise in net profit in 2009, compared with a 30 percent jump the previous year.

China's mobile market is expected to grow as the penetration rate was only at 56.3 percent, compared with 100 percent or more in South Korea and Japan, according to industry officials.

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