China Telecom Corp (CHA, quote), the smallest of the country's three mobile phone network operators, reported an 18.7 percent rise in fourth-quarter profit after rapid mobile sales growth pushed quarterly revenue to a record high.

The telco has more than half of subscribers signed up to 3G network contracts rather than the less lucrative 2G contracts, a proportion higher than both China Mobile (CHL, quote) and China Unicom (CHU,quote).

Its 3G network is based on an international standard and has typically trumped that of dominant carrier China Mobile where persistent quality issues has caused subscribers to defect, and prompted 2G users to opt for China Telecom when upgrading.

For the October-December period, China Telecom posted a 13.9 percent rise in revenue at 83.4 billion yuan (US$13.47 billion), according to Reuters calculations based on full-year earnings which met analyst estimates. That helped profit reach 2.8 billion yuan.

"The mobile Internet business in China has undergone an explosive growth momentum," Chief Executive Wang Xiaochu said in an earnings statement yesterday.

"Coupled with the accelerated evolution of technology and industry chain, there is a rapid upgrade in ... data usage habits."

For all of 2013, profit rose 17.4 percent to 17.5 billion yuan — the highest in six years — compared with a 17.6 billion yuan SmartEstimate of 32 analysts surveyed by Thomson Reuters. Revenue hit an all-time high of 321.6 billion yuan.

China Telecom has spent heavily on a 4G network which it launched last month before obtaining a license for its preferred 4G technology, to keep pace with China Mobile. China Unicom launched a 4G network on Tuesday.

For 2014, China Telecom set capital expenditure at 80.3 billion yuan from 79.99 billion yuan in 2013. Of the total, the company will spend over half to improve its mobile network, rather than a third last year.

A large chunk will go on 4G — which will get an extra 20 billion yuan from last year — to increase coverage and quality, the telco said.

That will include raising the number of 4G base stations to 80,000 this year from 60,000.

The remaining capex budget will be spent in other areas including broadband and Internet services.

China Telecom, which also offers fixed lines, accounted for under 15 percent of the country's 1.24 billion mobile users in January.

For 2013, revenue from its mobile arm jumped 28.3 percent to 151.2 billion yuan.

Content Curiosity of China.org.cn