China Telecom on Wednesday announced that it experienced strong growth in its 4G business in the first half of the year, but its financial results continue to show the effects of the recent VAT reforms, with net profit sliding and revenues and EBITDA remaining virtually flat.
The Chinese operator’s bottom line for the six months to the end of June came in at 10.98 billion yuan (€1.6 billion), down by 4% on the same period last year. Operating revenues fell by 0.6% to CNY164.95 billion and EBITDA crept up 0.4% to CNY50.74 billion.
Excluding the impact of the government’s VAT reforms, effective from late in the year-ago period, China Telecom said net profit rose by 11.3% and revenues by 3.5%.
The telco insisted it has succeeded in moderating the impact of the reforms and it is optimistic about the picture going forward.
"In the future, with the continual expansion of the VAT reform to other industries, it is expected that the company will be entitled to more input VAT credits, which will be beneficial for the enhancement of its profitability in the long term," it said.
Service revenues were flat at CNY147 billion, with 0.6% growth at the telco’s mobile business just offsetting a 0.4% decline in wireline. Meanwhile, 17.5% growth in mobile data revenues to CNY37.4 billion made up for a 17.4% decline in mobile voice revenues to CNY24.9 billion.
In its earnings announcement, China Telecom focused heavily on its progress in 4G, having been awarded its FDD LTE licence earlier this year.
"Taking full advantages of tower sharing, the company rolled out the 4G network fast and effectively to enhance time-to-market and savings in capital expenditure," the telco said.
4G net adds came in at 22 million during the reporting period to reach 29 million by the end of June. Its overall mobile subscriber base grew to 191.4 million from 185.6 million at the start of the year.
On the fixed-line side, China Telecom said it added 2.61 million broadband customers during the six months to reach 110 million, including 54 million fibre-to-the-home (FTTH) connections; FTTH net adds numbered around 11 million.
