Growth brings China Telecom strong profits [check out last paragraph]
scmp.com
Thursday April 29 1999
WANG XIANGWEI
China Telecom (Hong Kong) has reported a full-year
net profit of 6.9 billion yuan (about HK$6.41 billion),
which was at the higher end of analysts' expectations.
The results were bolstered by 1.61 billion yuan in
interest income and strong subscriber growth in the three
mobile phone operators China Telecom controls in
Guangdong, Zhejiang and Jiangsu provinces.
For last year, actual audited consolidated turnover was
26.35 billion yuan and earnings per share were 59 fen.
As the company bought the Jiangsu mobile phone
operator in June last year, a complete year-on-year
comparison can only be made using pro-forma figures
on an assumption that the current company structure
existed during all periods discussed.
For last year, the company's pro-forma sales were
28.52 billion yuan, up 49.19 per cent over 1997.
Pro-forma combined profits before exceptional items
and income tax were 8.26 billion yuan, up 26.42 per
cent over 1997.
Directors did not declare any dividend, the same as last
year.
China Telecom chairman Wang Xiaochu yesterday said
the profit surge was largely driven by strong growth in its
subscriber base.
By the end of last year, the number of mobile phone
subscribers jumped by 52.4 per cent to 6.53 million on a
pro-forma basis.
Li Ping, vice-chairman and chief operating officer, said
that in the first quarter of the year, the company added
another 1.05 million subscribers. The figure was higher
than market expectations, causing some analysts to
increase their estimates.
Stephen Leung, a telecoms analyst with Daiwa Institute
of Research, said the first quarter subscriber growth was
impressive and he would also increase his earnings
estimate for the company.
Hani Abuali, telecoms analyst with Donaldson Lufkin &
Jenrette, yesterday said he was bullish about the stock,
whose price could reach $20 before the end of the year.
Yesterday, China Telecom's share price closed lower 1
per cent at $17.05.
Other analysts have expressed concern about rates of
decline in connection charges and average monthly
revenue per user (ARPU), saying they were faster than
expected.
They also questioned whether the company could sustain
its strong subscriber growth of the first quarter, pointing
out that the strong demand could be due to seasonal
factors such as the Spring Festival in February.
Mr Wang said he expected connection charges to fall to
zero within the next two to three years. Connection
charges accounted for about 13.1 per cent of revenue
last year while the company said ARPU across its
operations fell to 440 yuan from 470 yuan in 1997.
He said the tariff cuts were expected to stimulate growth
in subscriber numbers and he expected call charges to
remain stable this year.
Analysts yesterday said Beijing's plan to introduce
one-way calling charges or calling party charges would
be delayed from this year to next.
Looking ahead, Mr Wang said Beijing's accession to the
World Trade Organisation and its plan to introduce
more competition would benefit the development of the
telecoms industry on the mainland although it would
present the company with a challenge.
"The mainland market has huge potential and enough
room for more than one mobile phone operator," he
said.
Mr Wang said the company would focus on expanding
its GSM (global system for mobile communications)
network and would not develop one based on the rival
standard in the United States, code division multiple
access, or CDMA.
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