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Carrier Services
China Telecom profit drops sharply while China Mobile stays the course
Despite tough economy, an East sub-sea cable is in the offing
by Ek Heng, Asia-Pacific Correspondent
China Telecom reported that its full-year profit for 2008 at CNY 884 million (US$130 million), a decline of 96.3 percent from CNY24.2 billion (US$3.5 billion) a year ago.
The telco attributed the sharp plunge to provisions arising from natural disasters in 2008 and a one-off write-down from retiring its low-end wireless service, known as Xiaolington or “Little Smart”, which does not offer roaming and other advanced services. If provisions for negative factors are excluded, the report added that its net profit would have been CNY20.6 billion (US$3 billion) reflecting a 12.8 percent drop instead.
Total revenue for 2008 for the telco was 3.3 percent higher at CNY186.8 billion (US$27.4 billion). Its chief executive, Wang Xiaochu is optimistic that despite the ‘financial crisis and other factors, demand for telecommunications is still strong.” China is still the world’s biggest market with much potential for telcos to tap on voice, messaging and other integrated communication services, especially with the phased implementation of 3G services.
Following the restructuring of China’s telecom industry, the one-time fixed-line carrier, now also offering mobile and broadband services, will spend US$6.88 billion in 2009 to expand its wireless network. It is targeting to roll out wireless services to more than 300 cities by middle of this year. China Telecom has 30.6 million mobile subscribers by February 2009, and it aims to increase its mobile subscribers to 100 million by 2011.
Owing to the weak economy, it has put off plans for a strategic partner and is looking at issuing up to CNY90 billion (US$13.2 billion) in debt locally this year to fund its expansion, according to the company.
One of its strategies for growth is the high-end business user where it announced earlier its plan to expand bandwidth in the cable network to Europe as well as network access point to Dubai to meet demand for more data transmission. Managing director of China Telecom (Europe), Yan Ou, was reported saying it will expand service using the Transit Europe Asia and China Number 2 cables which will be connected with Asia-Pacific networks.
Sterling results for China Mobile
For China Mobile, 2008 has been a good year as net profit increased 29.4 percent to CNY112.7 billion (US$16.5 billion) from CNY87 billion (US$12.7 billion) in the previous year. Total revenue for 2008 is 16 percent higher at CNY412.3 billion (US$60 billion) compared with CNY356 billion (US$52.3 billion) a year earlier.
The telco added 87.9 million subscribers in 2008 to have a customer base of 457.3 million by end December. It is looking at greater penetration into the rural areas where average revenue per user is expected to be lower but the telco is eyeing expansion opportunities in new markets as well as beyond China.
China Mobile's chief executive Wang Jianzhou was quoted as expressing interest in companies that have synergy with China Mobile in Asia or globally which could be a stake purchase or total takeover.
To date, CMPak Ltd is the only foreign acquisition where its parent company, China Mobile Communications Corp, took over Paktel, a Pakistan telecoms operator, in 2007 for US$460 million.
Telcos strike cable pact
Regardless of the economic disparities in China's telecom market, it appears that a group of telcos from from China, Taiwan, Japan and Singapore are reportedly planning to lay a new subsea cable linking the Asia-Pacific region, according to The Commercial Times, Taiwan.
Quoting unnamed Chunghwa Telecom sources, the report named the parties as China Unicom, Chunghwa and KDDI with a Singapore partnership either with Singapore Telecommunications or Starhub for the US$500 million Asia-Pacific Cable Network 3 (APCN3). The 1,000-km cable linking Singapore, Japan and Taiwan is likely to be completed by 2013. However, a China Unicom spokesman has refuted the report.
The vulnerability of existing subsea cables to damage from earthquake has prompted interest among regional telcos looking for added assurance in providing a reliable service.
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