Broadband and fixed-line phone operator China Netcom Group yesterday posted an 0.2 percent net profit gain to 10.5 billion yuan for 2007.

Netcom's revenue increased 1 billion yuan to 82 billion yuan last year. The telecom provider plans to boost growth by expanding innovative businesses, Zhang Chunjiang, chairman of Netcom, said yesterday.

The company will earmark 46 percent of its capital expenditure for new business areas over the next 12 months, against 36 percent in 2007.

"Like many fixed-line providers around the world, China Netcom is struggling with the slowdown of its traditional businesses," Zhang said. "We want to explore new areas like broadband and data communications."

Netcom's innovative business revenue constituted 34.7 percent of the total in 2007. Zhang said the segment will continue to grow to become the company's main growth engine.

The company cut capital expenditure 15.8 percent from 24.5 billion yuan in 2006 to 20.7 billion yuan in 2007. Its debt-to-equity ratio dropped from 47.3 percent to 39.8 percent last year.

But while Netcom plans to further reduce capital expenditure to 19.6 billion yuan this year, it will increase spending on innovative businesses, especially broadband, from 36 percent in 2007 to 46 percent this year.

Meanwhile, its free cash flow will increase to between 12.4 billion and 12.5 billion yuan this year, versus 11.7 billion yuan in 2007.

The company distributed a HK$0.59 dividend per share.

Meanwhile, Zhang said Netcom is yet to receive notice of the telecom industry restructure, but the provider is keen to get a mobile phone license.

He expects the company will eventually get a license in five years under the current climate of mergers between mobile and fixed-line operators.

Netcom is planning an A-share listing. "We don't have a concrete plan as to whether we'll sell new or existing shares (if an A-share listing is approved)," Zhang said.

He also confirmed that Spanish telecom operator Telefonica will soon raise its stake in China Netcom from 5 to 7.2 percent, but he wouldn't say if it will take an agreed 9.9 percent holding.

(China Daily March 26, 2008)