China Telecom favors FDD

Announcing its financial results on Wednesday, China Telecom also revealed that it favors FDD technology for its future LTE network. 
 
Chariman and CEO Wang Xiaochu declined to comment when the Chinese government would issue the licenses for commercial 4G services, but said China Telecom would prefer to choose wider deployed FDD-LTE technology over TD-LTE for 4G.
 
“The investment cost on TD-LTE is much higher than that on FDD-LTE,” he said.
 
Wang said China Telecom intends to rent the TD-LTE network from China Mobile if the company were asked to deploy the Beijing-backed 4G technology.
 
“We’ve been discussing with the regulator about this [renting TD-LTE from China Mobile] but it’s still in early stage,” he noted.
 
His comment threw cold water on market expectations that China’s three major carriers will all deploy the TD-LTE technology.
 
To accelerate the commercialization of TD-LTE, the Ministry of Industry and Information announced earlier this year that it has set aside a bulk of 190MHz spectrum on the 2500MHz-2690MHz frequency band for TD-LTE deployment. This led to wide speculations that both China Unicom and China Telecom will also operate 4G service on TD-LTE technology.
 
China Mobile announced earlier this week that it would pour 41.5 billion yuan (€5.1 billion) on building “commercial-ready” TD-LTE networks, as the company prepares for the rollout of the 4G services.
 
Wang said China Telecom plans to focus on deploying LTE to major cities first once it starts rolling out its network.
 
 
China Telecom revealed Wednesday that its net profit fell 9.5% last year to nearly 15 billion yuan ($2.4 billion) from a year earlier, despite recording a 15.5% growth in operating revenues.
 
The country’s smallest mobile carrier attributed the decline to intensified competition and rising cost on marketing Apple’s iPhone to lure more high-end customers to its EVDO network.
 
China Telecom last year spent nearly 22 billion yuan, up 39.1% from a year earlier, on subsidizing and promoting 3G smartphones, a bulk of which on marketing the iPhone. The company started selling Apple’s iPhone in the first quarter of last year, as it tries to get a bigger share in the high-end segment dominated by bigger rivals China Mobile and China Uncom.
 
Wang said the spending on iPhone subsidies has put “short-term pressure on profitability” but it will benefit the company in the long term by enhancing revenue growth and company value.
 
While the spending on handset subsidies is expected to rise this year, the ratio of handset subsidies to mobile service revenue is expected to decline, Wang noted.
 
Thanks to the introduction of iPhone and increased adoption of EVDO smartphones, China Telecom’s mobile service revenue jumped 36% to 92.8 billion last year, the highest growth in the industry. Mobile data revenue grew by 47.3% to 43.6 billion yuan, while voice service revenue increased 27.3% to 49.1 billion yuan.
 
According to Wang, about 43%, or 69.05 million, of China Telecom’s mobile customers were using 3G service. Mobile subscribers rose 27% to 161 million in 2012, as the company added 34.1 million new customers, with 33 million of those for its 3G EVDO network. This lifted its mobile market share by 1.5 percentage point to 14.5%. 
 
Blended (2G and 3G) APRU, meanwhile, rebounded to 53.9 yuan from 52.4 yuan a year earlier. 3G ARPU stood at 72 yuan, while 2G ARPU was 44 yuan.
 
Wang said China Telecom expects to add 30 million new 3G customers in 2013.
 
The company has set capital expenditure for 2013 at 75 billion yuan, up 3.3% from the previous year. The company may raise the capex and invest heavily on LTE if the 4G licenses are given out within this year, Wang added.

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