China Telecom’s Profit Gains First Time Since IPhone Sales Start
China Telecom Corp. (728), the country’s third-biggest mobile-phone operator by users, posted a gain in profit for the first time since it started selling Apple Inc. (AAPL)’s iPhone in March 2012 as the device helped boost data usage.
Net income rose 10 percent to 4.7 billion yuan ($762 million) in the first quarter, the Beijing-based company said in a statement yesterday. That matched the median estimate of five analysts surveyed by Bloomberg News.
China Telecom had reported a decline in quarterly profit since Chairman Wang Xiaochu began selling the iPhone on March 9, 2012, in a bid to gain ground from larger wireless carriers China Mobile Ltd. and China Unicom (Hong Kong) Ltd. China Telecom is beginning to benefit from the increase in users of the third-generation service, said Eva Yip, a Hong Kong-based analyst at Sun Hung Kai Financial Ltd.
“The iPhone helped China Telecom to lure more high-revenue users from competitors,” Yip said in an e-mail yesterday. “The proliferation of smartphones, including the iPhone, is helping stimulate data usage and data revenue.”
China Telecom said last year when it started sales of the iPhone that the device would help it achieve long-term sustainable growth even as it causes“short-term pressure” on profitability.
Sales in the first quarter rose 15 percent to 77.8 billion yuan from 67.9 billion yuan. That compares with the median estimate of 77 billion yuan in the Bloomberg News survey.
“Services like Internet access and data services continued robust growth,” Wang said in yesterday’s earnings release.
In the first quarter, the company’s mobile unit added a further 9 million 3G users, bringing its total to 78.1 million. The total number of wireless subscribers rose to 168 million.
China Telecom closed unchanged at HK$3.91 in Hong Kong trading yesterday, before the results were announced. The stock has dropped 9.3 percent this year, compared with a 0.5 percent decline in the benchmark Hang Seng Index.
The company ranks behind China Mobile (941) and China Unicom in wireless users in the Asian nation.
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 this past week reported its weakest profit growth in three quarters as higher costs eroded gains from an increase in users of high-speed network services.
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