China Telecom Profit Beats Estimates as IPhone Lifts Data

China Telecom Corp. (728), the country’s biggest fixed-line carrier, reported fourth-quarter profit that beat analysts’ estimates as customers using Apple Inc. (AAPL)’s iPhone helped boost sales of wireless data.

Net income fell 17 percent to 2.36 billion yuan ($380 million) from 2.84 billion yuan a year earlier, the Beijing- based company said in a statement today. That surpassed the 2.04 billion yuan average of six analysts’ estimates compiled by Bloomberg.

Chairman Wang Xiaochu began sales of subsidized iPhones last year, helping the company lure subscribers in the battle with larger wireless carriers China Mobile Ltd. (941) and China Unicom (Hong Kong) Ltd. China Telecom said at the time the device would boost long-term growth with “short-term pressure” on profitability due to promotion costs. The company said mobile data traffic volume almost tripled last year.

Average revenue per user of 53.9 yuan was stronger than we expected on both the mobile voice and data side,” Lisa Soh, an analyst with Macquarie Group Ltd. in Hong Kong, wrote in a report today.

China Telecom rose 0.8 percent to close at HK$3.93 in Hong Kong trading today. The stock has declined 8.8 percent this year compared with a 1.8 percent drop in the benchmark Hang Seng Index.

Photographer: Jerome Favre/Bloomberg

The China Telecom Corp. logo is displayed at a news conference in Hong Kong. Close

The China Telecom Corp. logo is displayed at a news conference in Hong Kong.

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Photographer: Jerome Favre/Bloomberg

The China Telecom Corp. logo is displayed at a news conference in Hong Kong.

Sales Rise

Sales in the fourth quarter rose 17 percent to 73.1 billion yuan, from 62.6 billion yuan. That compares with the 73.2 billion-yuan average of six analysts’ estimates.

Since releasing the iPhone, the carrier has reported three straight declines in quarterly profit.

“As China Telecom continues to focus on 3G expansion, we expect selling expenses, including handset subsidies, to remain at a higher level,” Cynthia Meng, a Hong Kong-based analyst with Jefferies Group Inc., wrote in a March 12 note to clients.

The carrier, the nation’s third-ranked wireless carrier, added 8 million users to its mobile unit in the quarter, boosting the number of subscribers to 160.6 million. That compares with 710.3 million customers at China Mobile and 239.3 million at China Unicom.

In December, China Telecom completed the purchase of a third-generation mobile network from its state-owned parent. Because the parent had borne costs to upgrade the network in the past, the acquisition will boost the Hong Kong-listed company’s capital spending 40 percent to 75 billion yuan this year, it said in a presentation on its website today.

With the 3G network, the company “captured the development pattern of the mobile Internet and developed sustainable competitive advantages,” Wang said in the statement.

China Telecom entered the wireless market in 2008 by acquiring the smaller of China Unicom’s two mobile divisions in a government-led revamp of the nation’s mobile-phone industry.

China Mobile on March 14 reported fourth-quarter net income climbed 6.1 percent to 36 billion yuan, beating analysts’ estimates.

China Unicom will report results for the period tomorrow.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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