China Telecom profits shrink

China Telecom, the smallest of the nation's three telcos in terms of subscribers, Wednesday posted shrinking annual profits for 2012 on rising costs and intensified competition with its two bigger rivals.

Net profits of China Telecom fell 9.5 percent to 14.93 billion yuan ($2.4 billion) in 2012 over the previous year, according to the company's financial disclosure released Wednesday. This compares to net profits of 16.4 billion yuan in 2011, when the growth figure registered 10.5 percent year-on-year.

Attributing the profit decline mostly to increased expenditures related to marketing initiatives to promote its customized version of the iPhone, China Telecom stressed in a statement Wednesday that "despite the short-term pressure on profitability, (the promotions) are expected to enhance long-term sustainable growth and value."

China Telecom, the nation's biggest fixed-line operator by subscribers, has long been weak at competing with the other two carriers in the cell phone arena.

Aiming for a breakthrough, especially in the market for high-end users accompanying the nation's 3G boom, the carrier inked a partnership with Apple Inc in March 2012 to become China's second operator to offer the iPhone, and has since invested heavily to offer subsidies on its customized iPhone products.

"Despite the falling profits, the carrier continues to see strong growth in revenue, signaling its vitality amid intensified rivalry during the nation's mobile Internet boom," Fu Liang, an independent telecom analyst, told the Global Times Wednesday.

China Telecom's business revenue rose 15.5 percent to 283.07 billion yuan over 2012, with its 3G subscriber population nearly doubling from the previous year to 69.05 million, according to its fiscal results.

A widening 3G user base thanks to hefty iPhone subsidies will benefit China Telecom this year, Fu believes, predicting a recovery in the company's net profits in 2013.

Concurrently announced monthly operating data, however, pointed to a moderation in China Telecom's ability to lure 3G users. The number of new users subscribing to China Telecom's 3G network totaled 2.81 million for February, slightly shrinking from the January reading of 3.01 million.

China Unicom's operating data was released Tuesday and showed 3.36 million new 3G subscribers, while China Mobile, the nation's biggest carrier, reported Wednesday a record high net 3G user increase in February, adding 9.51 million subscribers to its TD-SCDMA network.

China Mobile's soaring growth is mostly likely due to the telco titan's recent launch of a raft of budget smartphones that has many of its 2G users moving to its 3G network, according to analyst Fu.

China Mobile retains the largest user base among the three, rendering it less likely for the other two to expect a significant leap, Jane Zhang, a Beijing-based principal research analyst with market research firm Gartner Inc, told the Global Times Wednesday.

Facing fiercer competition from both smaller rivals as well as Internet firms such as Tencent, which have eroded the telecom carriers' traditional voice and text message services, even China Mobile's performance was seen as lackluster.

China Mobile's annual financial results were announced on March 14 to show the slowest growth in net profits in three years. China Unicom's financial disclosure for the same period will be announced Thursday.