Key Takeaways From China Telecom’s First Half Results

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China Telecom (NYSE:CHA), the smallest of the three Chinese wireless carriers, published its first half 2017 interim results on Wednesday, reporting moderate earnings growth, driven primarily by soaring mobile data consumption. Below we provide some of the key takeaways from the company’s earnings.

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China Telecom’s service revenues grew by around about 2% year-over-years in dollar terms, driven by strong mobile data usage, although this was offset by weaker voice and wireline revenues. The growth was stronger in local currency terms, as the RMB depreciated by about 5% year-over-year versus the dollar. Net profits improved marginally, driven by the higher revenue base and lower equipment subsidy costs, although operating margins trended slightly lower on account of higher expenses related to network quality enhancement and an increase in tower leasing fees.

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Wireless data revenues expanded as the carrier’s 4G penetration rose to about 66% of its overall subscriber base, about 10% ahead of last year’s figure. However, 4G subscriber net adds over H1 slowed down marginally to 30 million, on account of the higher penetration levels and competition from China Unicom, which has been expanding its 4G coverage. 4G data consumption per handset rose by 55% to 1,384 MB. The growing data usage has helped ARPU rise by about 2% to RMB 57. However, 4G-only ARPU saw a decline, driven by lower per-MB tariffs.

China Telecom’s wireline broadband business saw net subscriber adds 0f 4.98 million, taking its overall broadband subscriber base to 128 million. FTTH penetration improved to over 92%, with the average access bandwidth for users improved to 62 MBps, from about 50 MBps last year, driven by the Chinese government’s directive to telecom companies to improve data speeds and cut costs. ARPU declined by about 4% compared to last year to RMB 52.0.

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