China Telecom (NYSE:CHA) thrived in the second quarter to add 8.35 million new wireless users and earn profit that beat analyst expectations, and most of the gain was credited to the launch of the iPhone 4S on its service just before the start of the period.
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China Telecom started offering the latest version of Apple’s (NASDAQ:AAPL) smartphone on March 9, ending China Unicom’s (NYSE:CHU) exclusive claim to the device in mainland China. Net income for the second quarter was 4.55 billion yuan, or $716 million, and beat expectations of 4.4 billion yuan, according to Bloomberg. The company also saw its average revenue per user go up.
China Telecom has been fairly aggressive with its iPhone strategy, offering the device fully subsidized in exchange for a two-year contract at $62 per month or a three-year contract at $46 per month as the company works toward adding 35 million wireless users this year. While it does expect to see “short-term pressure” on profit margins because of the subsidy costs, China Telecom is also projecting large long-term growth as new subscribers start adopting the carrier.
The company’s handset subsidies jumped 50 percent to 11.5 billion in the first six months of this year, but the effect was smaller than feared. “It looks like the negative impact of iPhone subsidies was not as strong as people expected in the quarter, and average revenue per user was higher than we expected,” Mizuho Securities analyst Marvin Lo told Bloomberg.
China has been a big focus of Apple’s over the past several months as the country’s high growth potential leads to quick success. The iPhone maker is consciously making extra efforts to woo consumers in the country and announced enhanced support for Chinese-language users with its forthcoming iOS 6 software. The new mobile operating system, set to be launched this fall, will add support for Mandarin and Cantonese to Siri as well as easier Chinese character input and integration with services such as Baidu (NASDAQ:BIDU) and Sina Weibo (NASDAQ:SINA).