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China Telecom says profit slip 8 percent

BEIJING - China Telecom Ltd. said Thursday its first-half earnings slipped 8 percent as revenues for fixed-line voice service shrank and warned it faces pressure on profits as Beijing carries out a planned restructuring of its telecoms industry.

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Net profit for the six months ending June 30 was 12.7 billion yuan (US$1.85 billion), or 0.16 yuan (2.3 US cents) per share, down from 13.8 billion yuan in the year-earlier period, the Beijing-based company said.

China Telecom is the country's biggest fixed-line telephone provider and is expanding into the quickly growing mobile business under an industrywide restructuring plan announced by regulators in May.

That plan will create three carriers _ China Telecom, China Mobile Ltd. and China Netcom _ each with fixed line and mobile services.

China Telecom's efforts to expand the market for fixed-line voice service suffered ‘immense pressure’ in the first half due to the falling price of mobile service, Chairman and CEO Wang Xiaochu said in a statement.

The company should benefit in the long run but will face ‘downward pressure on our profit’ as it invests to get its mobile business up and running, Wang said.

Fixed-line carriers have responded to slack demand for voice service by promoting Internet access, Web-based cable television and other products.

China Telecom's first-half revenues for voice service fell 11.8 percent from the year-earlier period to 50.5 billion yuan (US$7.4 billion). Revenues for Internet and data services rose 27.3 percent to 24.5 billion yuan (US$3.6 billion), while those for business services climbed 31.6 percent to 12 billion yuan (US$1.75 billion).

‘The non-voice service has become the consistent driver for the revenue growth of the company,’ Wang said.

China Mobile's total number of access lines fell by 5.4 million, or 2.5 percent, to 215 million, Wang said. He said non-voice service as a share of China Telecom revenues expanded by 8.5 percentage points in the first half to 43.5 percent.

By contrast, China Mobile Ltd., the world's biggest phone company by subscribers, says it added 7 million accounts in July alone to bring its total to 421 million.

The industry restructuring, unveiled in May, calls for China Telecom to get into the mobile business by taking over a network from China United Telecommunications Inc., parent of China Unicom, the country's No. 2 mobile carrier. Shareholder approval of that purchase is still pending.

‘The severely imbalanced competition landscape in China's telecommunications market will be gradually improved,’ Wang said. ‘However, there will be short-term downward pressure on our profit as the market share of wireline subscribers will continue to shrink in the near term while our forthcoming mobile services operation will need significant investment.’

China Mobile said Wednesday its first-half profit surged 45 percent to 54.8 billion yuan (US$8 billion) and it forecast strong future growth.

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China Telecom Ltd.: www.chinatelecom.com.cn