Communications firm lifted by 3G business, shifts focus to 4G next

China Telecom Corp, one of the nation's three telecommunications carriers, posted better-than-expected earnings for the third quarter on Monday.

The results were released amid calls for restructuring the highly profitable industry by introducing more competition.

However, analysts said that the big three are likely to survive most policy changes - unless the government approves the established of a new, powerful fixed network operator.

China Telecom said that its business has grown "rapidly" this year as the third-generation sector has expanded.

Customers inspect Apple Inc's iPhone 5 at a China Telecom store in Haikou, Hainan province.[Photo / Provided to China Daily]

The number of mobile subscribers reached 181 million by the end of September and more than half were 3G users, according to the Hong Kong-listed company.

Third-quarter net income was up 20 percent year-on-year to 4.5 billion yuan ($740 million).

"China Telecom's 3G business is going fairly well, but it will put most of its focus on building the 4G network in the next year," said Milly Xiang, senior research manager and head of the telecom practice at IDC China.

The big three - China Telecom, China Mobile Ltd and China Unicom (Hong Kong) - are anxiously awaiting 4G licenses, which are expected to be issued by year-end.

4G networks enable faster Internet connection speeds, compared with 3G networks.

The Development Research Center of the State Council, a think tank to the top political leaders, over the weekend released its version of a reform roadmap that calls for a restructuring of the telecom industry.

The roadmap urges the government to restructure the telecom industry again and create "effective" competition among multiple telecom operators with equal competitiveness.

The proposal also promotes the integration of telecom, Internet and broadcasting networks and restructuring the regulatory body.

The industry was last restructured in 2008, when six major telecom operators were integrated into three State-owned carriers.

"The government has been trying to weaken the big three for a long time," said Xiang, adding that the opening up of the telecom market to private capital was a positive development.

In 2012, the Ministry of Industry and Information Technology allowed private capital into the basic telecom sector.

Private investors are allowed to set up virtual operators in China to run value-added services based on the basic telecom networks operated by the big three carriers.

"However, it remains uncertain what kind of policies will be introduced. If they're not forceful enough, the current industry landscape will most likely survive," said Xiang from IDC. But she added: "The big three are set to face a tough battle in the 4G era, despite policy uncertainty."

China Mobile, the country's largest operator by user numbers, is the most active player in developing 4G because its costly 3G project failed to lure high-end subscribers.

Many premium users left China Mobile and joined other carriers' networks over the past few years, according to Xiang.

The company reported a nearly 9 percent decline in third-quarter net profit.

China Unicom, however, may pay only partial attention to the next generation network because its 3G infrastructure is the strongest.