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To: Dealer who wrote (12621)	4/13/2000 7:27:00 AM
From: Dealer	Read Replies (1) \| Respond to of 35685

CHINA-- Technology News Thu, 13 Apr 2000, 7:23am EDT ChinaTel Posts 30% Drop in 1999 Net on $933 Million Writeoff By Biddy Chan Hong Kong, April 13 (Bloomberg) -- China Telecom (H.K.) Ltd., a unit of China's largest mobile phone operator, said earnings dropped for the first time since its October 1997 listing as it wrote off 8.2 billion yuan ($993 million) for old equipment to pave the way for more advanced data-related services. The state-controlled company, which owns networks in six of China's richest provinces, including Guangdong and Zhejiang, said net income fell 30 percent to 4.8 billion yuan. Earnings per share dropped 32 percent to 0.4 yuan. Analysts expected China Telecom to post a net income of 9 billion if it didn't make any writeoffs, according to 32 analysts surveyed by the online edition of the Estimate Directory. ``I don't think (the writeoff) will have a sustained impact on the share price,' David Gibbons, an analyst at HSBC Securities, said before the results were released during the lunchtime stock market break. `` It's simply an accounting change and has no impact on the cash flow' and the company's fundamentals, he said. ChinaTel shares slid as much as 5.6 percent to HK$59 today amid a global sell-off in technology stocks and concern about the writeoff. The stock was recently quoted at HK$60.75. ChinaTel, the only publicly traded company that owns telecommunications networks in mainland China, faces increasing competition from China United Telecommunications Corp. and other rivals as China prepares to open the fast-growing market to foreign competition in preparation for joining the World Trade Organization. Wireless Internet Analysts said ChinaTel will eventually follow other mobile phone companies in more developed markets such as Hong Kong to boost call minutes by offering more data-related services -- and to write off its analog equipment. It decided to make the writeoff now to take advantage of largely positive sentiment toward its shares, they said. While ChinaTel shares lost 12 percent so far this week amid an overall downtrend in global technology stocks, they are still up 25 percent this year, outperforming the benchmark Hang Seng Index's 4 percent drop. Of the 21 analysts tracked by Bloomberg, 15 have a ``buy' recommendation on the stock and two a ``hold.' For the six months through June, ChinaTel posted a net profit of 3.95 billion yuan, up 14 percent from the same period a year earlier. That figure included a write-off of 500 million yuan. ChinaTel recently began allowing its subscribers access to a limited amount of stock, sports and weather information via mobile phones in some Chinese cities in southern Guangdong province, the nation's wealthiest province. The contribution of such services, though, was ``very low' and ChinaTel doesn't expect them to account for a ``material' part of its development costs, Ding Donghua, its chief financial officer, said last month. Low Penetration Rate ``The whole issue of Internet and data hasn't been explored,' said Andy Perkins, an analyst with Prudential-Bache Securities in Hong Kong. ``It's going to provide substantial upside for the company.' ChinaTel still has a room for expansion even without data- related services, as the nation's penetration rate for mobile phones now stands at just 3.3 percent. It can also grow through acquisitions. The company's subscriber base grew to 15.2 million at the end of November -- it hasn't released the figure for December --partly through the purchase of three mobile networks in the Chinese provinces of Fujian, Hainan and Henan that month. At the end of 1998, when it owned just three networks in the provinces of Guangdong, Zhejiang and Fujian, it had only 6.3 million customers. While competition from China Unicom, the nation's No. 2 phone company, caused ChinaTel's market share to drop to 91.4 percent in June from 94.5 percent at the end of 1998, ChinaTel still managed to post a 14 percent rise in net income in the six months through June to 3.95 billion yuan, on continued subscriber growth. Competition ``is not really an issue' for ChinaTel, even as China joins the WTO, said Rohit Sobti, an analyst at Salomon Smith Barney. It will take time for China to issue new licenses and for the market to saturate, he said