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To: Maurice Winn who wrote (28662)	4/29/1999 3:50:00 AM
From: djane	Read Replies (1) \| Respond to of 152472

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. Copyright ©1999 South China Morning Post Publishers Ltd. All Rights Reserved.