Aug. 30 (Bloomberg) — China Telecom Corp., the nation’s biggest fixed-line phone operator, reported its slowest profit growth on record as competition from mobile operators intensified.

First-half net income rose 2.6 percent to 11.6 billion yuan ($1.45 billion), or 0.14 yuan a share, from 11.3 billion yuan, or 0.14 yuan, a year earlier, the Beijing-based company said today. Sales rose to 84.4 billion yuan from 80.6 billion yuan.

Chairman Wang Xiaochu, 48, has turned to high-speed Internet services and interactive television ventures to bolster earnings after cell-phone companies cut rates. At the end of June, about 33 percent of China’s population owned a cell phone, compared with 28 percent who had a fixed-line subscription, according to the Ministry of Information Industry.

“Second-half outlook remains tough,” said Kelvin Ho, an analyst at Nomura International (Hong Kong) Ltd., who rates the stock a “buy” with a target price of HK$2.95. “China Telecom will rely more on broadband for growth. Wireless operators have pre-empted competition by new entrants by cutting tariffs.”

China Telecom was expected to post earnings of 11.9 billion yuan according to the median estimate of eight analysts in a Bloomberg survey.

The first-half profit margin fell to 13.7 percent from 14 percent a year earlier, the company said in a statement.

Earnings before interest, taxes, depreciation and goodwill amortization rose 4 percent to 44.2 billion yuan, China Telecom said.

Broadband Users

The company added a record 4.4 million broadband Internet users in the first six months. The company’s broadband subscribers increased 52 percent to 21 million last year from 13.9 million in 2004, it said.

China added 7.6 million broadband Internet users in the first half for a total of 45.1 million by the end of June,

The phone operator’s capital spending in the first half declined 9.1 percent to 20.8 billion yuan. Capital expenditure for the year will the 51 billion yuan, it said.

The first-half profit increase is the smallest since the company’s shares were listed in November 2002 on the Hong Kong stock exchange.

China Telecom said first-half profit, including connection fees of 2.5 billion yuan, fell to 14.1 billion yuan from 14.7 billion yuan a year earlier. Sales rose to 86.9 billion yuan from 84 billion yuan. The government stopped connection fees, which refer to the one-time charge of linking fixed-line users to the main network, in 2001. The charges were amortized over 10 years.

Source- http://www.bloomberg.com

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