China Netcom announced its unaudited 2008 interim results today and said its revenue for the first half of 2008 hit CNY41.125 billion.

That revenue includes upfront connection fees of CNY505 million. Excluding upfront connection fees, revenue was CNY40.62 billion, representing a decrease of 0.15% over the same period of last year. Net profit was CNY5.877 billion, up 11.9% year on year because of the change in corporate tax rate and gain on non-cash transactions.

The company reported a decline in total capital expenditure of 10.7% year-on-year to CNY7,527 million. In particular, investment in the businesses of fixed-line and PHS only accounted for 4.4% of the total, down 13.2% compared to the same period last year.

Zuo Xunsheng, chairman of China Netcom, said, "We continued to step up effort to develop innovative businesses. In traditional fixed-line services, we used high-quality and bundled services, reformed pricing mechanisms and improved customer experience to promote customer loyalty. As a result, the company achieved good results in its strategic transformation into a 'broadband communications and multimedia service provider'."

China Netcom's traditional fixed-line service faced major challenges. They are losing local access subscribers, leading to a decline in revenue from the traditional business. As of June 30, 2008, the company had 108,510,000 local access subscribers, 2,310,000 less than at the end of 2007. Of this number, fixed-line subscribers declined by 1,499,000, while PHS subscribers declined by 811,000.