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Mobile Phones Cut China Telecom Profits

China Telecom Corp. said Monday that annual profits fell 13 percent last year as more customers switched to mobile phones.

Net profit in 2007 fell to 23.7 billion yuan ($3.4 billion), from 27.2 billion yuan in 2006, the nation's largest fixed-line operator said.

China Telecom said income from its voice business fell 7.9 percent from the year before as the number of its access lines in service fell 1.2 percent to 220 million, from 222.7 million in 2006.

However, overall revenues climbed 1.7 percent to 178.7 billion yuan ($25.5 billion) from 175.6 billion yuan.

China Telecom is gearing up for a "full services offering" to expand its non-fixed line broadband and wireless businesses as it struggles to compete with cell-phone rival China Mobile.

"Although the intensifying market competition is a serious challenge to us, the upcoming full services offering will bring enormous business opportunities," Wang Xiaochu, China Telecom's chairman, said in a statement.

The company saw declines in virtually every area of its traditional phone business. Revenue from local phone services, which comprised nearly 40 percent of total operating revenues, fell 9.8 percent. Upfront connection fees dropped 33.7 percent; installation fees fell 6 percent; income from monthly fees declined 12.5 percent; and revenue from long-distance phone services sank 6 percent, China Telecom said.

China Telecom also said it incurred 572 million yuan ($81.7 million) in losses due to damage caused by severe snow and ice storms in January and February, a figure not reflected in the 2007 financial figures.