China Netcom looks to IPTV for growth

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China Netcom, the country’s second largest fixed-line operator, said on Tuesday it planned to use broadband television to boost its high-speed internet subscriber base and compensate for slowing growth in its core business.

Although internet protocol television (IPTV) is still banned in most parts of China, Netcom last year launched a trial in the northern Heilongjiang province, which has signed up 48,000 subscribers.

“Once the government restriction is removed, we will make big investments in IPTV,” said Zuo Xunsheng, senior vice-president and chief operating officer, who did not say when Beijing would relax its policy.

Like many fixed line operators, such as Hong Kong’s PCCW in which Netcom has a 20 per cent stake, the Chinese operator has been promoting its broadband business as a source of growth in what is an otherwise maturing industry. Chinese telecoms companies are also waiting for the government to award third generation mobile licences, which it is expected to do this year or in 2007.

Last year, revenue from the company’s traditional businesses, such as local and long distance calls, only grew 1.4 per cent to Rmb64.6bn, compared with growth of 50.2 per cent to Rmb7.8bn for broadband.

Mr Zuo said its IPTV business, which offers subscribers 41 satellite TV channels, 14 customised channels and pay-on-demand programmes for Rmb60 a month, has been very successful.

Netcom hopes that by improving speed and content, it could further boost the number of broadband users. These grew 35.1 per cent to 11.48m last year, representing 13 per cent of the company’s fixed line customers.

The company, which also offers a limited wireless service, plans to offer more fixed-line, mobile and broadband bundled services. It said broadband customers on average paid Rmb65.20 each per month last year, compared with fixed-line users’ Rmb44.60.

Netcom on Tuesday reported a better-than-expected five-fold surge in 2005 net profit to Rmb13.9bn, compared with Rmb2.7bn in the previous year, helped by the inclusion of four new provincial operations and one-off gains. Sales rose 4.5 per cent from Rmb83.5bn in 2004 to Rmb87.2bn last year.

Netcom in October completed the acquisition of four networks in Heilongjiang, Jilin, Inner Mongolia and Shanxi from its state-owned parent, which contributed 15 per cent to the company’s bottom line last year.

Netcom’s shares rose 5.2 per cent to HK$14.10 on Tuesday.

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