China Telecom for FDD-LTE 4G Broadband

Contrary to market concerns that China Telecom will be required to invest in TD-LTE capex, management reiterated that the company intends to adopt FDD-LTE when it upgrades to 4G. Even if the MIIT required CT to provide TD-LTE services, the company is open to the option of leasing network capacity from CM rather than investing in the network rollout.

4G capex is expected to be manageable if CT gets FDD-LTE license compared to TD-LTE. Management believes 3G and 4G networks will
co-exist for a long time, and CT continued to have 800MHz spectrum advantage for 3G. The existing 800MHz spectrum should be sufficient for 2G and 3G capacity in coming years. The company plans to roll out 4G network only in downtown areas of cities.

China Telecom built 280,000 WiFi hotspots in 2012, reaching total hotspots of 900,000.

China Telecom does not plan to impose charges on OTT service providers, as the impact from applications such as Tencent’s Wechat is limited for CT given the company‚Äôs focus on data revenue rather than voice and SMS

China Telecom is a CDMA based Wireless operator and sees 4G to be at least 12 months away. For China Telecom, Mobile MOU declined 6% YoY to 296, whereas average 3G handset data usage increased 26% from 106MB/mth in 2011 to 134MB/mth in 2012. Smartphone models increased from 200 at the end of 2011 to 380 by the end of 2012, with smartphone sales growing 1.4x from 17 mn in 2011 to 41 mn in 2012, which accounted for >60% of total handset sales in 2012.

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