For the first three quarters of 2016, China Telecom had excellent performance in its overall results and showed robust growth momentum. The operating revenues of the Company were RMB263,816 million, representing an increase of 7.1% over the same period of last year; of which the service revenues were RMB233,494 million, representing an increase of 5.6% over the same period of last year. Net profit was RMB17,543 million, representing an increase of 7.2% over the same period of last year. EBITDA was RMB76,033 million, representing a decrease of 0.6% over the same period of last year. EBITDA margin (EBITDA divided by service revenues) was 32.6%.
For the first three quarters of 2016, China Telecom increased efforts in "New Convergence" development and continued to promote the users to upgrade from 3G to 4G as well as deepened the data traffic operation, achieving rapid growth in 4G users and mobile service revenues. The number of mobile subscribers of the Company reached approximately 212 million, representing a net addition of 14.59 million; of which the number of 4G terminal users reached 107 million, representing a net addition of 49.03 million. Meanwhile, the handset data traffic reached 833kTB, representing an increase of 127% over the same period of last year. The monthly average data traffic per 4G user achieved rapid growth and reached 920MB. The average mobile service revenue per user per month (ARPU) in the first three quarters of 2016 remained steady with slight increase as compared to that for the full year of last year.
China Telecom continued to strengthen the business development of wireline broadband especially the FTTH so as to promote the healthy growth in the revenues from wireline services. The wireline broadband subscribers reached 121 million, representing a net addition of 7.66 million; of which FTTH subscribers reached 97.68 million, representing a net addition of 26.69 million, accounting for approximately 81% of wireline broadband subscribers. The overall wireline data services continued its healthy growth momentum.
Leveraging the e-Surfing HD platform and smart home gateway, and riding on our competitive advantages in subscribers scale, the Company endeavoured to build a "Smart Family" system. The net addition of e-Surfing HD subscribers was 9.78 million, representing an increase of 129% as compared with the subscriber growth number recorded in the same period last year. The total number of e-Surfing HD subscribers exceeded 50 million while the revenue increased by 33% over the same period last year. The number of active "BestPay" subscribers exceeded 8 million and "BestPay" positioned the second in third-party ranking of mobile payment industry apps, while total transaction amount was approximately RMB380 billion. The whole-network efficient-centralisation of Internet of Things (IoT) business was launched in April with a focus on key breakthroughs in areas such as smart transport, smart logistics, wearable devices and Internet of vehicles. In the first half of the year, the net addition of IoT connections exceeded 3 million. The Company will expedite the construction of an advanced IoT platform through self-R&D and cooperation. Fully leveraging the integration of cloud and network together with the existing data resources advantages, the Company accelerated efficiently-centralised development of cloud and Big Data businesses. The revenues from cloud services increased by 41% over the same period last year while the revenues from Big Data increased by nearly 3 times. We actively explored and developed the "Internet+" market with a focus on three key areas including government administration, education and healthcare and hence the quantity of orders from key government and enterprise customers increased by nearly 30% over the second half of last year. The development trend of emerging areas progressed well with vast potentials in the future prospect.
In the second half of the year, the Company will proactively respond to the increasingly intensified market competition and changes in external environment. Oriented by market share dominance, the Company will expedite the scale development of two fundamental businesses, effectively collaborate on the operations of five major emerging areas while also endeavouring to enhance the six key capabilities in order to accelerate the transformation of our resource edges and capabilities into competitive strengths. With reform and innovation as the driving force, the Company will promote the development strategy with talent development as the priority, optimise the market-oriented incentive mechanism, bolster vitality and improve efficiency in order to lay down a solid foundation for accelerated transformation and upgrades. At the same time, the Company will comprehensively promote reconstitution of four major areas including business, network, operations and management in order to accelerate the implementation of the new strategy on transformation and upgrades. The Company will strive to become a leading integrated intelligent information services operator, facilitate development towards the national strategy of "Cyberpower" and also serve society and the general public as a whole, while continuously creating new value for shareholders.
2016 CAPEX budget remained at RMB 97 billion, down by 11% from 2015. CAPEX for the first half was 40.7 billion. Without adjusting the full year CAPEX budget, the Company planned to add an extra of 50k 4G BTSs this year. Total addition of new 4G BTSs is increased to 340k, reaching 850k 4G BTSs by the end of 2016. In the first half of 2016, the Company's CAPEX continued to tilt towards high-growth businesses including mobile and fibre broadband to improve our network advantages and investment efficiency. In the first half of 2016, investments in 4G network was RMB 19.2 billion. Total 4G base stations reached 610k as at the end of June 2016, achieving full 4G basic coverage for populations in cities and village/county/town areas. Investment in fibre broadband was RMB15 billion, FTTH home pass coverage was 88% in cities. In the second half of 2016, the Company will accelerate fibre network coverage precisely and promote end-to-end speed upgrade. It is targeted to achieve fibre network basic coverage in all cities by the end of 2016 to further strengthen our wireline and wireless edges.
In the second half of 2016, the Company will commence 800MHz refarm in rural area, with a target to achieve refarming the entire network in 2017. The Company is planned to commence VoLTE deployment and target to conduct commercial trial for VoLTE in 2017. 800MHz refarm shall lay good network foundation for both VoLTE and NB-IoT concurrently.

The Company took the initiative to liaise with Tower Company on the tower lease arrangement and finalized the lease agreement with TowerCo which effectively lowered the tower leasing fee. In the first half of 2016, tower leasing fee was RMB 6.9 billion under the finalized leasing arrangement, with full year budget of no more than RMB 16 billion. As at the end of June, the Company leased around 550k towers from the Tower Company. Sharing ratio for the newly leased towers was above 80% while the overall sharing ratio of all leased towered were around 55%. The increase in tower sharing ratio benefits the Company with a more rapid and efficient 4G network rollout, which enhance the time-to-market of our 4G network with a lower CAPEX. The Company leveraged the sharing of tower resources to enhance investment return. Though the tower leasing fee is currently at 10% higher than the cost of self-owned and operate and compressing our EBITDA, unit leasing fee should be reduced progressively as the sharing ratio increases over time. In the longer term, with the scale development of the Tower Company's business, profitability of the Tower Company is expected to improve and our Company will be benefitted from the enhancement in earnings and corporate value of the Tower Company.
Taking into account the return to shareholders, the Company's profitability, cash flow and capital requirements for its future development, the Board of Directors recommended at the shareholders' meeting held in May that a dividend equivalent to HK$0.095 per share be declared for the year 2015, maintaining at the same level of dividends as last year. Going forward, the Company will strive to enhance its profit while paving the way for an increase in future dividends.

Starting from the end of 2004, the Company unwaveringly persisted in pursuing strategic transformation and upgrades, and has surmounted tough difficulties to pave a new path for promoting China Telecom's development through transformation. At present, we are about to enter into an advanced stage of information civilisation of mankind, the era of intellectual service. The Company officially established a comprehensive transformation and upgrades plan (Transformation 3.0) at the end of June 2016 and positioned itself as a leading integrated intelligent information services operator.

The Company will focus and link through the main theme of intelligence and will promote the reconstitution of network, business, operations and management based on the three main directions namely network intelligentisation, service ecologicalisation and operation intellectualisation. Integrated intelligent information services featuring connection on demand, automatic response, realistic virtual experience and high price-to-performance ratio will be provided to customers. Network intelligentisation: Being guided by CTNet2025, the Company will promote network reconstitution, deepen open-source technology applications to accomplish the open integration of network and IT, moving forward towards the combination of development and operations as a whole. The Company will be able to provide customers with state-of-the-art network experience with embedded visible, self-selective and self- served characteristics. Service ecologicalisation: The Company will further emphasise the key operating focus, "2+5". Through open cooperation, integrated innovation and promotion of business reconstitution, the Company will endeavour to build up the five key business ecosystems, namely Intelligent Connection, Smart Family, Internet Finance, new style ICT applications, and IoT in order to achieve co-existence, co-innovation and "win-win" outcomes. Operation intellectualisation: Being driven by Big Data applications, through enhancement of six key capabilities in network fundamentals, network operations, data operation, channel sales, customer service and talent development in order to promote the reconstitution of operations and management to support smart operations.

Last updated on 16 Nov 2016